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 Ecole Supérieure des Sciences Economiques et Commerciales de Tunis

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.

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

Domaines: Economies et finances

Essahbi Essaadi, Jamel Jouini, Wajih Khallouli. The Asian Crisis Contagion: A Dynamic Correlation
Approach Analysis. Panoeconomicus, 2009, 56 (2), pp.241-260. ⟨10.2298/PAN0902241E⟩. ⟨halshs-00404386⟩