Measuring Contagion with a Bayesian Time-Varying Coefficient Model

Author/Editor:

Alessandro Rebucci ; Matteo Ciccarelli

Publication Date:

September 1, 2003

Electronic Access:

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Summary:

We propose using a Bayesian time-varying coefficient model estimated with Markov chain-Monte Carlo methods to measure contagion empirically. The proposed measure works in the joint presence of heteroskedasticity and omitted variables and does not require knowledge of the timing of the crisis. It distinguishes contagion not only from interdependence but also from structural breaks and can be used to investigate positive as well as negative contagion. The proposed measure appears to work well using both simulated and actual data.

Series:

Working Paper No. 2003/171

Subject:

Currencies Currency markets Exchange rates Expenditure Financial markets Foreign exchange Metal prices Money Prices Public expenditure review

English

Publication Date:

September 1, 2003

ISBN/ISSN:

9781451858525/1018-5941

Stock No:

WPIEA1712003

Pages:

32

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