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Are Financial Crises Alike?

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Author Info
MArdi Dungey ()
Renee Fry ()
Brenda Gonzales-Hermosillo ()
Vance L. Martin ()
Chrismin Tang ()

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Abstract

This paper investigates whether fi?nancial crises are alike by considering whether a single modelling framework can fi?t multiple distinct crises in which contagion effects link markets across national borders and asset classes. The crises con- sidered are Russia and LTCM in the second half of 1998, Brazil in early 1999, dot-com in 2000, Argentina in 2001-2005, and the recent U.S. subprime mortgage and credit crisis in 2007. Using daily stock and bond returns on emerging and developed markets from 1998 to 2007, the empirical results show that fi?nancial crises are indeed alike, as all linkages are statistically important across all crises. However, the strength of these linkages does vary across crises. Contagion chan- nels are widespread during the Russian/LTCM crisis, are less important during subsequent crises until the subprime crisis, where again the transmission of con- tagion becomes rampant.

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File URL: http://cama.anu.edu.au/Working%20Papers/Papers/2008/Dungey_Fry_Gonzales_Martin_Tang_152008.pdf
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Paper provided by Australian National University, Centre for Applied Macroeconomic Analysis in its series CAMA Working Papers with number 2008-15.

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Length: 58 pages
Date of creation: Jun 2008
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Handle: RePEc:acb:camaaa:2008-15

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C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Brenda González-Hermosillo, 2008. "Investors’ Risk Appetite and Global Financial Market Conditions," IMF Working Papers 08/85, International Monetary Fund. [Downloadable!]
  2. Renee Fry & Vance L. Martin & Chrismin Tang, 2008. "A New Class Of Tests Of Contagion With Applications To Real Estate Markets," CAMA Working Papers 2008-01, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
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