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Financial contagion of the 2008 crisis: is there any evidence of financial contagion from the US to the Baltic states

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  • Andres KUUSK

    (University of Tartu, Faculty of Economics and Business Administration, Tartu, Estonia)

  • Tiiu Paas

    (University of Tartu, Faculty of Economics and Business Administration, Tartu, Estonia)

  • Karmen Viikmaa

    (University of Tartu, Faculty of Economics and Business Administration, Tartu, Estonia)

Abstract

The paper aims to investigate the research question whether the US 2008 crisis spilled over contagiously to the Baltic States as small open economies. In order to examine the evidence of financial contagion as a systematic component of financial risks in the case of the Baltic States, we employ several testing methodologies like correlation coefficients based methods adjusting also with possible heteroskedasticity and ARCH-GARCH framework. The results are somewhat mixed. On the one hand, stock returns’ correlations between US and Baltic States increased during crisis times, confirming the financial contagion hypothesis. On the other hand, volatility has not spilled over from US to Estonia, Latvia and Lithuania, neither have volatility spillovers become stronger after the crisis hit.

Suggested Citation

  • Andres KUUSK & Tiiu Paas & Karmen Viikmaa, 2011. "Financial contagion of the 2008 crisis: is there any evidence of financial contagion from the US to the Baltic states," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 2, pages 61-76, December.
    • Handle: RePEc:jes:journl:y:2011:v:2:p:61-76
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    File URL: http://www.ejes.uaic.ro/articles/EJES2011_0202_KUU.pdf
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    References listed on IDEAS

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    Cited by:

    1. Deltuvaitė Vilma, 2016. "Investigation of Stock Market Integration in the Baltic Countries," Economics and Business, Sciendo, vol. 28(1), pages 38-44, April.
    2. Jasmina Ðuraškovic & Slavica Manic & Dejan Živkov, 2019. "Multiscale Volatility Transmission and Portfolio Construction Between the Baltic Stock Markets," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 69(2), pages 211-235, April.
    3. Sirin Tangpornpaiboon & Nattapong Puttanapong, 2016. "Financial contagion of the global financial crisis from the US to other developed countries," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 2(1), pages 38-45.
    4. Kregždė Arvydas & Kišonaitė Karolina, 2018. "Co-movements of Lithuanian and Central European Stock Markets Across Different Time Horizons: A Wavelet Approach," Ekonomika (Economics), Sciendo, vol. 97(2), pages 55-69, December.

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