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Are Financial Crises Alike?
Author:
Chrismin Tang null

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Mr. Mardi Dungey null

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Mr. Vance Martin null

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Ms. Brenda Gonzalez-Hermosillo
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Ms. Renee Fry null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 014
Language:
English
Publication Date:
01 Jan 2010
DOI:
https://doi.org/10.5089/9781451962086.001
ISBN:
9781451962086
ISSN:
1018-5941
Pages:
59
Keywords:
WP; subprime crisis; Financial crises; Contagion; Factor models; contagion channel; LTCM crisis; crisis model; crisis period; dot-com crisis; pressure approach; Securities markets; Stock markets; Bonds; Stocks; Global; South America
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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This paper investigates whether financial crises are alike by considering whether a single modeling framework can fit multiple distinct crises in which contagion effects link markets across national borders and asset classes. The crises considered are Russia and LTCM in the second half of 1998, Brazil in early 1999, dot-com in 2000, Argentina in 2001-2005, and the recent U.S. subprime mortgage and credit crisis in 2007. Using daily stock and bond returns on emerging and developed markets from 1998 to 2007, the empirical results show that financial crises are indeed alike, as all linkages are statistically important across all crises. However, the strength of these linkages does vary across crises. Contagion channels are widespread during the Russian/LTCM crisis, are less important during subsequent crises until the subprime crisis, where again the transmission of contagion becomes rampant.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund