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

By Brenda Gonzalez-Hermosillo, Vance Martin, Renee Fry, Mardi Dungey

April 1, 2003

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Format: Chicago

Brenda Gonzalez-Hermosillo, Vance Martin, Renee Fry, and Mardi Dungey. Unanticipated Shocks and Systemic Influences: The Impact of Contagion in Global Equity Markets in 1998, (USA: International Monetary Fund, 2003) accessed September 19, 2024

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.

Subject: Econometric analysis, Emerging and frontier financial markets, Factor models, Financial institutions, Financial markets, Securities markets, Stock markets, Stocks

Keywords: Asia and Pacific, Contagion, Contagion from Russia, Crisis transmission, Eastern Europe, Emerging and frontier financial markets, Equity Markets, Factor models, Financial Crises, Global, Hedge fund LTCM, International Spillovers, LTCM, LTCM crisis, LTCM period, LTCM to Russia, Market participant, Russia, Russia's default, Securities markets, Stock markets, Stocks, Transmission mechanism, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/084
Stock No:

WPIEA0842003
ISBN:

9781451850666
ISSN:

1018-5941

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