Do institutions prevent contagion in financial markets? Evidence from the European debt crisis

Kosmidou, Kyriaki; Kousenidis, Dimitrios; Ladas, Anestis C.; Negkakis, Christos

doi:10.1080/1351847x.2018.1552171

Cited by 11 publications

(6 citation statements)

References 39 publications

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“…Moreover, markets appear to have perceived that the risks of the Euro-zone collapsing had diminished. This would imply that the European institutions, in general and the ECB in particular, can influence the degree of contagion from extreme negative events in member countries (see, for example, Kosmidou, et al, 2018).…”

Section: Discussionmentioning

confidence: 99%

Contagion from the crises in the Euro-zone: where, when and why?

Pentecost

Bird

et al. 2019

The European Journal of Finance

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The prevalence of contagion between the Euro-zone countries and other European countries since the Greek crisis of 2009 is now well-known, but the factors that influence the pattern of this contagion are not well understood. We investigate this question both within Europe and beyond to the USA and Japan, using an asymmetric M-GARCH model that focuses on extreme values of the risk premia on government bonds. We compare these extreme values with news of major events and find that they are highly correlated. We find a different pattern of contagion emanating from Ireland compared to the other crisis countries of Greece, Italy, Portugal and Spain. We also examine the factors that have made countries vulnerable to contagion and find that financial factors are more important than trade ones. However, intra-Euro-zone trade has also been a significant factor between the major Euro-zone economies. There is little evidence that global factors affect contagion between EU member states, but some evidence that nominal exchange rate movements offer a degree of insulation from contagion for the non-Euro zone states.

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Section: Discussionmentioning

confidence: 99%

Contagion from the crises in the Euro-zone: where, when and why?

Pentecost

Bird

et al. 2019

The European Journal of Finance

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“…Various methods have been proposed in the literature to study the contagion effect of financial crisis on real economy. These include GARCH model [36][37][38], Copula model [39], event study methodology [40], and error correction model [41]. In this paper, we firstly propose the higherorder information spatial econometric model based on the symbolic transfer entropy.…”

Section: Methodology and Modelingmentioning

confidence: 99%

The impact of financial contagion on real economy-An empirical research based on combination of complex network technology and spatial econometrics model

Chen

Hao

2020

PLoS ONE

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This study presents financial network indicators that can be applied to inspect the financial contagion on real economy, as well as the spatial spillover and industry aggregation effects. We propose to design both a directed and undirected networks of financial sectors of top 20 countries in GDP based on symbolized transfer entropy and Pearson correlation coefficients. We examine the effect and usefulness of the network indicators by newly using them instead of the original Dow Jones financial sector as explanatory variables to construct the higher-order information spatial econometric models. The results demonstrate that the estimated accuracies obtained from both the two networks are improved significantly compared with the spatial econometric model using the original data. It indicates that the network indictors are more effective to capture the dynamic information of financial systems. And meanwhile, the accuracy based on the directed network is a little higher than the undirected network, which indicates the symbolized transfer entropy, i.e. the directed and weighted network, is more suitable and effective to reflect relationships in the financial field. In addition, the results also show that under the global financial crisis, the co-movement between financial sectors of a country/region and the global financial sector as well as between financial sectors and real economy sectors is increased. However, some sectors in particular Utilities and Healthcare are impacted slightly. This study tries to use the financial network indicators in modeling to study contagion channels on the real economy and the industry aggregation effects and suggest how network indicators can be practically used in financial fields.

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“… Samarakoon (2017) investigated the contagion effect of the Eurozone debt crisis on the fifty-two stock markets around the world and found that the Asian stock markets display no signs of contagion from the Eurozone crisis. Kosmidou, Kousenidis, Ladas, and Negkakis (2018) further studied the Eurozone debt crisis and show that policy announcements from the EU, ECB, and IMF had an effect on the transmission of banking sector shocks to the stock market during this crisis. Furthermore, they found that national governments' policy responses seemed to play an important role in the spread of the crisis.…”

Section: Review Of Literaturementioning

confidence: 99%

Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial, the US subprime and the Eurozone debt crisis

Chopra

Mehta

2022

Journal of Asian Economics

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The ongoing COVID-19 pandemic has sent shock waves across the global stock markets. Several financial crises in the past too have had a global impact with their reach extending beyond the country of origin. The current study compares the contagion effect of four such crises viz. the Asian financial crisis, the US subprime crisis, the Eurozone debt crisis, and the currently ongoing Covid-19 crisis on Asian stock markets to understand which of these has had the most severe impact. It finds that among all the four crises, the US subprime crisis has been the most contagious for the Asian stock markets. The study also highlights the difference between severities of a liquidity crisis versus a real crisis and identifies the markets that remained insulated from all these crises, a finding which will be useful for portfolio managers in devising their asset allocation.

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Do institutions prevent contagion in financial markets? Evidence from the European debt crisis

Cited by 11 publications

References 39 publications

Contagion from the crises in the Euro-zone: where, when and why?

Contagion from the crises in the Euro-zone: where, when and why?

The impact of financial contagion on real economy-An empirical research based on combination of complex network technology and spatial econometrics model

Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial, the US subprime and the Eurozone debt crisis

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