On the stability of domestic financial market linkages in the presence of time-varying volitility
Flavin, Thomas and Panopoulou, Ekaterini and Unalmis, Deren (2008) On the stability of domestic financial market linkages in the presence of time-varying volitility. Department of Economics Finance & Accounting NUI Maynooth.
We analyze the stability of domestic financial linkages between periods of calm and turbulent market conditions. Our model develops a simultaneous test of shift contagion and bi-directional pure contagion, which is applied to the equity and currency markets of a group of East Asian emerging economies. Our results show a great deal of instability in these markets with widespread evidence of pure contagion in both directions. There is less evidence of shift contagion with the transmission of common shocks unchanged between regimes for the majority of countries.
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