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Unanticipated Shocks and Systemic Influences: The Impact of Contagion in Global Equity Markets in 1998
Author: Ms. Brenda Gonzalez-Hermosillo, Mr. Vance Martin, Ms. Renee Fry, and Mr. Mardi Dungey
Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 084
Language:
English
Publication Date:
01 Apr 2003
DOI:
https://doi.org/10.5089/9781451850666.001
ISBN:
9781451850666
ISSN:
1018-5941
Pages:
28
Keywords:
WP; transmission mechanism; Financial Crises; Contagion; International Spillovers; Russia; LTCM; Equity Markets; LTCM crisis; LTCM period; hedge fund LTCM; contagion from Russia; Russia's default; crisis transmission; market participant; LTCM to Russia; Stock markets; Stocks; Emerging and frontier financial markets; Securities markets; Factor models; Global; Eastern Europe; Asia and Pacific
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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August to September 1998 has been characterized as one of the worst episodes of global financial distress in decades. This paper investigates the transmission of the Russian and the LTCM crises through global equity markets using a panel of 14 developing and industrial countries. The results show that contagion was systemic during the period, with industrial countries providing the dominant cross-country transmission linkages. Both crises reinforced each other, highlighting the importance of studying them jointly. An implication of the empirical results is that models of contagion that exclude industrial countries are potentially misspecified and may yield misleading outcomes.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund