Unanticipated Shocks and Systemic Influences: The Impact of Contagion in Global Equity Markets in 1998
April 1, 2003
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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
Pages:
28
Volume:
2003
DOI:
Issue:
084
Series:
Working Paper No. 2003/084
Stock No:
WPIEA0842003
ISBN:
9781451850666
ISSN:
1018-5941
