The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis

Essahbi Essaadi (1) , Jamel Jouini (2, 3) , Wajih Khallouli (4)

1 GATE - Groupe d'analyse et de théorie économique
2 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
3 UCAR - Université de Carthage (Tunisie)
4 Université de Tunis

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

Mots clés: sequential selection procedure; shift-contagion; time-varying correlation

Domaines: Economies et finances

Essahbi Essaadi, Jamel Jouini, Wajih Khallouli. The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis. 2004. ⟨halshs-00201220⟩