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International Contagion Effects from the Russian Crisis and the LTCM Near-Collapse
Author:
Ms. Renee Fry null

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Mr. Vance Martin null

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Ms. Brenda Gonzalez-Hermosillo
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Mr. Mardi Dungey null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 074
Language:
English
Publication Date:
01 Apr 2002
DOI:
https://doi.org/10.5089/9781451849608.001
ISBN:
9781451849608
ISSN:
1018-5941
Pages:
48
Keywords:
WP; global bond; financial crises; contagion effects; international spillovers; Russia; LTCM; LTCM crisis; contagion effect; market participant; asset class; U.S volatility; wealth effect model; rate of return; hedge fund Ltcm; developing market; financial market crisis; a number of market; International capital markets; Yield curve; International bonds; Securities markets; Global; Asia and Pacific; Eastern Europe
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We examine empirically the episode of extraordinary turbulence in global financial markets during 1998. The analysis focuses on the market assessment of credit risk captured by daily movements in bond spreads for twelve countries. A dynamic latent factor model is estimated using indirect inference to quantify the effects of unanticipated shocks across borders or "contagion," controlling for common global shocks, country-specific shocks and regional factors. The results show that there were substantial international contagion effects resulting from both the Russian and LTCM crises. The proportion of volatility explained by contagion is not necessarily larger in developing than in developed nations.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund