Abstract
This paper investigates contagion to European capital markets associated with seven big financial shocks between 1997 and 2002. We apply a technique using heteroscedasticity adjusted correlation coefficients to discriminate between contagion and interdependence. The analysis focuses on a comparison between developed Western European markets and emerging capital markets in Central and Eastern Europe. We find little evidence of significant increases in cross-market linkages after the crises under investigation. The Central and Eastern European capital markets are not more vulnerable to contagion than Western European markets.
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