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Contagion or Real Linkages? Some Evidence from China's Emerging Parallel Markets

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  • Ali M. Kutan

Abstract

This paper empirically tests the existence of contagion using data on China's five parallel markets with different entry barriers for foreign capital. Taking the 1997 stock market crash as our experiment and using data on A, B and H shares, red chips and American depository receipts, the present paper tests whether these China‐backed market returns respond differently to foreign shocks during the pre‐1997 and post‐1997 crash period. Evidence suggests that the contagion effects are stronger in markets with fewer entry barriers. An important implication of our findings is that countries vulnerable to contagion could be justified to impose some limits on capital flows.

Suggested Citation

  • Ali M. Kutan, 2007. "Contagion or Real Linkages? Some Evidence from China's Emerging Parallel Markets," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(4), pages 52-65, July.
    • Handle: RePEc:bla:chinae:v:15:y:2007:i:4:p:52-65
    DOI: 10.1111/j.1749-124X.2007.00075.x
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    References listed on IDEAS

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    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. repec:bla:scandj:v:98:y:1996:i:4:p:463-84 is not listed on IDEAS
    3. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
    4. Mr. Paul R Masson, 1998. "Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 1998/142, International Monetary Fund.
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    Cited by:

    1. Malay K. Dey & Chaoyan Wang, 2021. "Volume decomposition and volatility in dual-listing H-shares," Journal of Asset Management, Palgrave Macmillan, vol. 22(4), pages 301-310, July.
    2. Wen, Shaobo & An, Haizhong & Huang, Shupei & Liu, Xueyong, 2019. "Dynamic impact of China's stock market on the international commodity market," Resources Policy, Elsevier, vol. 61(C), pages 564-571.

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