Abstract
The contagion of the financial crisis is an unavoidable fact for the economies of the global system anymore. Therefore measuring contagion, analyzing the propagation of volatility across countries became mainly important research topics among economists. There are many different econometric techniques used to test for contagion effect of financial crises. Transmission of shocks from one country to another can be calculated with four different techniques. The empirical literature mostly based on the techniques of measuring cross-market correlations, GARCH models, cointegration and probit models. In these models, economists use financial or real indicators or both of them in their analyses. As the financial indicators, they generally use share price indices, interest rates, exchange rates, and inflation rate. As the real indicators, they generally use the values of GDP, imports, exports, unemployment rate, etc. The aim of this paper is to underline the prominent empirical studies in the field of contagious crises
Highlights
The models of contagious crises mostly appeared after the 1990s, and increased in number especially after the Asian crisis
The world economy faced with the 1987 American stock market crisis, the 1980s Latin American crises, the 1992 European Monetary System Crisis, the 1994 Mexican crisis, the 1997 Asian crisis, the 1998 Russian crisis, the 2008 crisis, and the European debt crisis respectively
It is clear that the contagion effect is inevitable for an economy which is connected to other world economies by financial or real linkages
Summary
The models of contagious crises mostly appeared after the 1990s, and increased in number especially after the Asian crisis. This paper is a comprehensive look at the empirical studies on measuring contagion. The models of contagious crises have an important place in economic literature.
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