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Shift versus traditional contagion in Asian markets

Thomas Flavin and Ekaterini Panopoulou

We test for shift contagion between pairs of East Asian equity markets over a sample including the financial crisis of the 1990’s. Employing the methodology of Gravelle et al. (2006), we find little evidence of change in the mechanism by which common shocks are transmitted between countries. Furthermore, we analyze the effects of idiosyncratic shocks and generate time-varying conditional correlations. While there clearly is significant time variation in the pair wise correlations, this is not more pronounced during the Asian crisis than it had been historically.

Keywords: Shift contagion; Financial market crises; Regime switching; Structural transmission; Emerging markets
JEL Classification: F42; G15; C32

Last updated 28 August 2014 by IIIS (Email).