Testing for contagion in economic literature

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Abstract

The contagion of the financial crisis is an unavoidable fact for the economies of the global system anymore. Therefore measuring contagion, analyzing the propagation of volatility across countries became mainly important research topics among economists. There are many different econometric techniques used to test for contagion effect of financial crises. Transmission of shocks from one country to another can be calculated with four different techniques. The empirical literature mostly based on the techniques of measuring cross-market correlations, GARCH models, cointegration and probit models. In these models, economists use financial or real indicators or both of them in their analyses. As the financial indicators, they generally use share price indices, interest rates, exchange rates, and inflation rate. As the real indicators, they generally use the values of GDP, imports, exports, unemployment rate, etc. The aim of this paper is to underline the prominent empirical studies in the field of contagious crises.

Keywords: Contagion, Financial Contagion, Economic Crises, Economic Globalization

Authors’ individual contribution: the author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

JEL Classification: F30, F60, F65, G1

Received: 27.05.2019
Accepted: 23.07.2019
Published online: 24.07.2019

How to cite this paper: Kocabas, C. (2019). Testing for contagion in economic literature. Journal of Governance & Regulation, 8(3), 42-46. https://doi.org/10.22495/jgr_v8_i3_p3