Contagion effects on capital and forex markets around GFC and COVID-19 crises : a comparative study

• Autorzy: Brania Krzysztof , Gurgul Henryk

Identyfikatory

DOI

10.37190/ord210203

• Języki publikacji: EN

Abstrakty

EN

The spread of crises across the financial and capital markets of different countries has been studied. The standard method of contagion detection is based on the evolution of the correlation matrix for the example of exchange rates or returns, usually after removing univariate dynamics with the GARCH model. It is a common observation that crises that have occurred in one financial market are usually transmitted to other financial markets/countries simultaneously and that they are visible in different financial variables such as returns and volatility which determine probability distribution. The changes in distributions can be detected through changes in the descriptive statistics of, e.g., returns characterised by expected value, variance, skewness, kurtosis, and other statistics. They determine the shape of the distribution function of returns. These descriptive statistics display dynamics over time. Moreover, they can interreact within the given financial or capital market and among markets. We use the FX currency cluster represented by some of the major currencies and currencies of the Višegrad group. In analysing capital markets in terms of equity indexes, we chose developed markets, such as DAX 30, AEX 25, CAC 40, EURSTOXX 50, FTSE 100, ASX 200, SPX 500, NASDAQ 100, and RUSSEL 2000. We aim to check the changes in descriptive statistics, matrices of correlation concerning exchange rates, returns and volatility based on the data listed above, surrounding two crises: the global financial crisis (GFC) in 2007–2009 and Covid 2019.

Słowa kluczowe

EN

contagion; correlation; exchange rate; return; volatility; GFC in 2007–2009; COVID-19

• Wydawca: Oficyna Wydawnicza Politechniki Wrocławskiej
• Czasopismo: Operations Research and Decisions
• Rocznik: 2021
• Tom: Vol. 31, No. 2
• Strony: 59--92
• Opis fizyczny: Bibliogr. 45 poz., rys.

Twórcy

autor

Brania Krzysztof

• Department of Applications of Mathematics in Economics, Faculty of Management, AGH University of Science and Technology, 30-067 Krakow, Poland

autor

Gurgul Henryk

• Department of Applications of Mathematics in Economics, Faculty of Management, AGH University of Science and Technology, 30-067 Krakow, Poland

Bibliografia

• [1] ABDENNADHER E., HELLARA S., Causality and contagion in emerging stock markets, Borsa Istanbul Rev., 2018, 18 (4), 300–311.
• [2] BOLLERSLEV T., Modelling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH approach, Rev. Econ. Stat., 1990, 72, 498–505.
• [3] BAI J., PERRON P., Computation and analysis of multiple structural changes model, J. Appl. Econ., 2003, 18, 1–22.
• [4] BARUNÍK J., VÁCHA L., Contagion among Central and Eastern European stock markets during the financial crisis, Fin. úvěr-Czech J. Econ. Fin., 2013, 63 (5), 443–453.
• [5] BEKAERT G., EHRMANN M., FRATZSCHER M., MEHL A., Global crises and equity market contagion, NBER Working Paper, No. 17121, National Bureau of Economic Research, U.S.A., 2011.
• [6] CAPPIELLO L., ENGLE R., SHEPPARD K., Asymmetric dynamics in the correlations of global equity and bond returns, J. Fin. Econ., 2006, 4, 537−572.
• [7] CHA B., OH S., The relationship between developed equity markets and the Pacific Basin’s emerging equity markets, Int. Rev. Econ. Fin., 2000, 9 (4), 299–322.
• [8] CELIK S., The more contagion effect on emerging markets: the evidence of DCC-GARCH model, Econ. Modell., 2012, 29 (5), 1946–1959.
• [9] ČERNÝ A., KOBLAS M., Stock market integration and the speed of information transmission. The role of data frequency in cointegration and granger causality tests, J. Int. Bus. Econ., 2005, 1, 110–120.
• [10] CHEN G.M., FIRTH M., RUI O.M., Stock market linkages. Evidence from Latin America, J. Bank. Fin., 2002, 26, 1113−1141.
• [11] CLAESSENS S., DORNBUSCH R., PARK Y.-C., Contagion. Why crises spread and how this can be stopped, [In:] International Financial Contagion, S. Claessens, K. Forbes (Eds.), Kluwer, Boston 2001, 19–41.
• [12] CLAESSENS S., FORBES K. (Eds.), International Financial Contagion, Kluwer, Boston 2001.
• [13] CZAPKIEWICZ A., WÓJTOWICZ T., Spatial contagion between stock markets in Central Europe, Manage. Econ., 2017, 18 (1), 23–45.
• [14] DORNBUSCH R., PARK Y.-C., CLAESSENS S., Contagion. Understanding how it spreads, World Bank Res. Obs., 2000, 15 (2), 177–197.
• [15] DRAZEN A., Political contagion of currency crises, [In:] P. Krugman (Ed.), Currency Crises, Chicago University Press, Chicago 2000, 47–67.
• [16] DUNGEY M.H., MARTIN V.L., GONZÁLEZ-HERMOSILLO B., FRY R., Transmission of financial crises and contagion. A latent factor approach, Oxford University Press, New York 2010.
• [17] DURANTE F., FOSCOLO E., An analysis of the dependence among financial markets by spatial contagion, Int. J. Int. Syst., 2013, 28 (4), 319–331.
• [18] DURANTE F., FOSCOLO E., JAWORSKI P., WANG H., A spatial contagion measure for financial time series, Exp. Syst. Appl., 2014, 41 (8), 4023–4034.
• [19] DURANTE F., FOSCOLO E., SABO M., A spatial contagion test for financial markets in synergies of soft computing and statistics for intelligent data analysis, [In:] R. Kruse, M. Berthold, C. Moewes, M. Gil, P. Grzegorzewski, O. Hryniewicz (Eds.), Advances in Intelligent Systems and Computing, Springer, Berlin 2013, 313–320.
• [20] DURANTE F., JAWORSKI P., Spatial contagion between financial markets. A copula-based approach, App. Stoch. Models Bus. Ind., 2010, 26 (5), 551–564.
• [21] ÉGERT B., KOČENDA E., Interdependence between Eastern and Western European stock markets. Evidence from intraday data, Econ. Syst., 2007, 31 (2), 184–203.
• [22] ÉGERT B., KOČENDA E., Time-varying synchronization of European stock markets, Emp. Econ., 2011, 40 (2), 393–407.
• [23] FORBES K., RIGOBON R., No contagion, only interdependence. Measuring stock market comovements, . Fin., 2002, 62 (5), 2223–2261.
• [24] FRY-MCKIBBIN F., HSIAO Y.-L., MARTIN V.L., Joint tests of contagion with applications to financial crises, J. Quant. Fin., 2019, 19 (3), 473–490.
• [25] GERLACH S., SMETS F., Contagious speculative attacks, Eur. J. Pol. Econ., 1995, 11, 5–63.
• [26] GOLDSTEIN M., KAMINSKY G.L., REINHART C.M., Assessing financial vulnerability. Developing an early warning system for emerging markets, Washington, D.C., Institute for International Economies (https://mpra.ub.uni-muenchen.de/24577/1/MPRA_paper_24577.pdf), 2000.
• [27] GRAVELLE T., KICHIAN M., MORLEY J., Detecting shift-contagion in currency and bond markets, J. Int. Econ., 2006, 68 (2), 409–423.
• [28] HANOUSEK J., KOČENDA E., KUTAN A.M., The reaction of asset prices to macroeconomic announcements in new EU markets: evidence from intraday data, J. Fin. Stab., 2009, 5 (2), 199–219.
• [29] HO L.C., HUANG C.H., Did the contagion effect exist? Evidence from Abu Dhabi, Jordan and America, Econ. Res., 2014, 27 (1), 740–754.
• [30] HUYNH T.L.D., NASIR M.A., NGUYEN S.P., DUONG D., An assessment of contagion risks in the banking system using non-parametric and copula approaches, Econ. Anal. Pol., 2020, 65 (C), 105–116.
• [31] JUNG R., MADERITSCH R., Structural breaks in volatility spillovers between international financial markets. Contagion or mere interdependence?, J. Bank. Fin., 2014, 47 (C), 331–342.
• [32] KAO Y.S., ZHAO K., KU Y.C., NIEH C.C., The asymmetric contagion effect from the U.S. stock market around the subprime crisis between 2007 and 2010, Econ. Res., 2019, 32 (1), 2422–2454.
• [33] KAROLYI A.G., Does international finance contagion really exist?, Int. Fin., 2003, 6 (2), 179–199.
• [34] KIM S.J., MOSHIRIAN F., WU E., Dynamic stock market integration driven by the European Monetary Union. An empirical analysis, J. Bank. Fin., 2005, 29, 2475−2502.
• [35] LONGIN E., SOLNIK B., Extreme correlation of international equity markets, J. Fin., 2001, 56 (2), 649–676.
• [36] MASSAD N., ANDERSEN J.V., Three different ways synchronization can cause contagion in financial markets, Risks, 2018, 6, 104. DOI:10.3390/risks6040104.
• [37] MASSON P.R., Multiple equilibria, contagion, and the emerging market crises, IMF Working Paper WP/99/164, International Monetary Fund, 1999.
• [38] NIEH C.C., KAO Y.S., YANG C.H., The asymmetric contagion from the U.S. stock market around the subprime crisis, [In:] Studies on Financial Markets in East Asia, Kyushu University Press, Fukuoka 2011.
• [39] SAVVA C.S., ASLANIDIS C., Stock market integration between new EU member states and the Eurozone, Emp. Econ., 2010, 39 (2), 337–351.
• [40] SYLLIGNAKIS M.N., KOURETAS G.P., Dynamic correlation analysis of financial contagion: Evidence from the Central and Eastern European markets, Int. Rev. Econ. Fin., 2011, 20 (4), 717–732.
• [41] SYRIOPOULOS T., Dynamic linkages between emerging European and developed stock markets. Has the EMU any impact?, Int. Rev. Fin. Anal., 2007, 16 (1), 41−60.
• [42] TSE Y.K., TSUI A.K.C., A multivariate generalized autoregressive conditional heteroscedasticity model with time-varying correlations, J. Bus. Econ. Stat., 2002, 20 (3), 351–362.
• [43] VORONKOVA S., Equity market integration in Central European emerging markets. A cointegration analysis with shifting regimes, Int. Rev. Fin. Anal., 2004, 13 (5), 633–647.
• [44] WANG H., YUAN Y., LI Y., WANG X., Financial contagion and contagion channels in the forex market: A new approach via the dynamic mixture copula-extreme value theory, Econ. Model., 2021, 94, 401–414.
• [45] WANG G.J., XIE C., Tail dependence structure of the foreign exchange market. A network view, Exp. Syst. Appl., 2016, 46, 164-179.

Uwagi

Opracowanie rekordu ze środków MNiSW, umowa Nr 461252 w ramach programu "Społeczna odpowiedzialność nauki" - moduł: Popularyzacja nauki i promocja sportu (2021).