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International Contagion Effects from the Russian Crisis and the LTCM Near-Collapse

Author/Editor: Dungey, Mardi | Fry, Renee | González-Hermosillo, Brenda | Martin, Vance
Authorized for Distribution: April 1, 2002
Electronic Access: Free Full Text (PDF file size is 2,836KB)
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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: We examine empirically the episode of extraordinary turbulence in global financial markets during 1998. The analysis focuses on the market assessment of credit risk captured by daily movements in bond spreads for twelve countries. A dynamic latent factor model is estimated using indirect inference to quantify the effects of unanticipated shocks across borders or "contagion," controlling for common global shocks, country-specific shocks and regional factors. The results show that there were substantial international contagion effects resulting from both the Russian and LTCM crises. The proportion of volatility explained by contagion is not necessarily larger in developing than in developed nations.
 
Series: Working Paper No. 02/74
Subject(s): Financial crisis | Russian Federation | Capital
Author's keyword(s): financial crises | contagion effects | international spillovers | Russia | LTCM
 
English  
    Published:   April 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA0742002   Pages:   48
    Price:   US$15.00
       
     
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