Unanticipated Shocks and Systemic Influences : The Impact of Contagion in Global Equity Markets in 1998

Author/Editor:

Brenda Gonzalez-Hermosillo ; Vance Martin ; Renee Fry ; Mardi Dungey

Publication Date:

April 1, 2003

Electronic Access:

Free Full text (PDF file size is 865 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

August to September 1998 has been characterized as one of the worst episodes of global financial distress in decades. This paper investigates the transmission of the Russian and the LTCM crises through global equity markets using a panel of 14 developing and industrial countries. The results show that contagion was systemic during the period, with industrial countries providing the dominant cross-country transmission linkages. Both crises reinforced each other, highlighting the importance of studying them jointly. An implication of the empirical results is that models of contagion that exclude industrial countries are potentially misspecified and may yield misleading outcomes.

Series:

Working Paper No. 03/84

Subject:

English

Publication Date:

April 1, 2003

ISBN/ISSN:

9781451850666/1018-5941

Stock No:

WPIEA0842003

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

28

Please address any questions about this title to publications@imf.org