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Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?

Author

Listed:
  • Aloui, Riadh
  • Aïssa, Mohamed Safouane Ben
  • Nguyen, Duc Khuong

Abstract

The paper examines the extent of the current global crisis and the contagion effects it induces by conducting an empirical investigation of the extreme financial interdependences of some selected emerging markets with the US. Several copula functions that provide the necessary flexibility to capture the dynamic patterns of fat tail as well as linear and nonlinear interdependences are used to model the degree of cross-market linkages. Using daily return data from Brazil, Russia, India, China (BRIC) and the US, our empirical results show strong evidence of time-varying dependence between each of the BRIC markets and the US markets, but the dependency is stronger for commodity-price dependent markets than for finished-product export-oriented markets. We also observe high levels of dependence persistence for all market pairs during both bullish and bearish markets.

Suggested Citation

  • Aloui, Riadh & Aïssa, Mohamed Safouane Ben & Nguyen, Duc Khuong, 2011. "Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure?," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 130-141, January.
    • Handle: RePEc:eee:jbfina:v:35:y:2011:i:1:p:130-141
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    More about this item

    Keywords

    Extreme comovements Copula approach BRIC emerging markets Global financial crisis;

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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