The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis

  • Essahbi Essaadi Unité d'Analyse Quantitative Appliquée (UAQUAP)-ISG, Tunisie; GATE-Lyon 2 (UMR 5824 CNRS), 25 Rue Kamel Attaturk Bardo 2000, Tunisia
  • Jamel Jouini Université 7 Novembre de Carthage, F.S.E.G.N., E.S.S.A.I. and L.E.G.I., Tunisie; Université de la Méditerranée, GREQAM, France
  • Wajih Khallouli Université de Tunis, Unité d'Analyse Quantitative Appliquée (UAQUAP) and ESSEC, Tunisie

Abstract

In this paper we are testing for contagion caused by the Thai baht collapse of July 1997. In line with earlier work, shift-contagion is defined as a structural change within the international propagation mechanisms of financial shocks. We adopt Bai and Perron’s (1998) structural break approach in order to detect the endogenous break points of the pair-wise time-varying correlations between Thailand and seven Asian stock market returns. Our approach enables us to solve the misspecification problem of the crisis window. Our results illustrate the existence of shift-contagion in the Asian crisis caused by the crisis in Thailand.


Key words: Shift-contagion, Time-varying correlation, Sequential selection procedure.
JEL: C22, G15.

How to Cite
Essaadi E., Jouini J., & Khallouli W. (2009). The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis. Panoeconomicus, 56(2), 241-260. doi:10.2298/PAN0902241E
Section
Original scientific paper