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Stock market interdependence, contagion, and the U.S. financial crisis: The case of emerging and frontier markets

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  • Samarakoon, Lalith P.

Abstract

This paper examines transmission of shocks between the U.S. and foreign markets to delineate interdependence from contagion of the U.S. financial crisis by constructing shock models for partially overlapping and non-overlapping markets. There exists important bi-directional, yet asymmetric, interdependence and contagion in emerging markets, with important regional variations. Interdependence is driven more by U.S. shocks, while contagion is driven more by emerging market shocks. Frontier markets also exhibit interdependence and contagion to U.S. shocks. Except for Latin America, there is no contagion from U.S. to emerging markets. But there is contagion from emerging markets to the U.S.

Suggested Citation

  • Samarakoon, Lalith P., 2011. "Stock market interdependence, contagion, and the U.S. financial crisis: The case of emerging and frontier markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(5), pages 724-742.
    • Handle: RePEc:eee:intfin:v:21:y:2011:i:5:p:724-742
    DOI: 10.1016/j.intfin.2011.05.001
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    More about this item

    Keywords

    Interdependence; Contagion; U.S. financial crisis; Emerging markets; Shock models;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F30 - International Economics - - International Finance - - - General
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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