Spatial Aspects of Contagion among Emerging Economies

Abstract

A spatial model is used to specify and then test for the existence of contagion among emerging market economies. We consider both trade and regional channels of contagion. Our results suggest that contagion is a statistically significant factor in foreign exchange markets and, furthermore, its effects are not uniform across the countries considered. Our results also suggest that trade links are significant channels of contagion transmission; on the other hand, geographic distances do not appear to be significant channels of contagion transmission. We also report results which indicate the extent of contagion. These results relate to effects which emanate from one country to another.

Aspects spatiaux de la contagion parmi les économies émergentes

Résumé?Nous faisons usage d'un modèle spatial pour spécifier, puis tester, l'existence d'une contagion parmi les économies des marchés émergents. Nous nous penchons sur les vecteurs commercial et régional de cette contagion. Nos résultats indiquent d'une part que la contagion est un facteur significatif sur le plan statistique dans les marchés à commerce extérieur, d'autre part que ses effets ne sont pas uniformes dans les pays examinés. Nos résultats nous permettent d'affirmer également que les relations commerciales sont des vecteurs significatifs de transmission de la contagion; par contre, les distances géographiques ne semblent pas être des vecteurs significatifs de transmission de la contagion. Nous présentons également des résultats qui soulignent l’étendue de la contagion: ces résultats portent sur les effets émanant d'un pays à un autre.

Aspectos espaciales del contagio entre economias emergentes

Résumén?Se utiliza un modelo espacial para especificar, y luego se comprueba la existencia de contagio entre las economías de mercados emergentes. Consideramos canales de contagio, tanto comerciales como regionales. Nuestros resultados sugieren que el contagio es un factor estadísticamente significativo en los mercados de divisas, así como que sus efectos no son uniformes a través de los países considerados. Nuestros resultados también sugieren que los lazos comerciales son canales significativos para la transmisión de contagio; por otra parte, las distancias geográficas no parecen ser canales significativos de transmisión de contagio. También incluimos resultados que indican la extensión del contagio. Dichos resultados se relacionan con efectos que emanan de un país a otro.

     

Industry risk transmission channels and the spillover effects of specific determinants in China’s stock market: A spatial econometrics approach

This paper uses a spatial econometrics approach to study the industry risks in China’s stock market. We comprehensively consider the real linkage and information risk transmission channels and analyze the risk spillovers of specific determinants. Our empirical results show the following: 1) The real linkage channel and information channel are both effective transmission channels for driving spillover effects, and the information channel is of the utmost importance. 2) The spillover effects of specific determinants exist and are persistent. The superposition of spillover effects may lead to extreme risk. 3) The transmission channels and spillover effects are asymmetric in different regimes.     

Equity market contagion during the global financial crisis: Evidence from the world's eight largest economies

The global financial crisis (2007–2009) saw sharp declines in stock markets around the world, affecting both advanced and emerging markets. In this paper we test for the existence of equity market contagion originating from the US to advanced and emerging markets during the crisis period. Using a latent factor model, we provide strong evidence of contagion effects in both advanced and emerging equity markets. In the aggregate equity market indices, contagion from the US explains a large portion of the variance in stock returns in both advanced and emerging markets. However, in the financial sector indices we find less evidence of contagion than in the aggregate indices, and this is particularly the case for the advanced markets. The results suggest that contagion effects are not strongly related to high levels of global integration.     

Contagion effects in ASEAN-5 exchange rates during the Covid-19 pandemic

The aim of this study is to examine the pure and fundamentals-based contagion effects in ASEAN-5 exchange rates during Covid-19 period using daily exchange rates from June 2019 to December 2020. We adopt VECM within the structural VAR framework and higher time–frequency wavelet analysis. The VECM findings show that ASEAN-5 exchange rates are cointegrated during this pandemic and should there be any disequilibrium, daily rate of adjustments in the Indonesian rupiah, Malaysian ringgit and Singapore dollar are 6.58%, 1.47% and 2.45% respectively. The wavelet power spectrum implies that Indonesia, Malaysia and Singapore experience prolonged high degree of exchange rates volatility, Thailand experiences mild volatility in the short run and high volatility in the long run and only Philippines experiences mild volatility in the short run and no heightened long run volatility. The wavelet coherence shows Indonesian rupiah reacts first to the Covid-19 shock leading to fundamentals- based contagion to Malaysia and Thailand, and temporary pure contagion based on sentimental to Philippines and Singapore. Only the Philippine peso that insulates itself from the long run shocks. These findings are important as it gives insights into the nature of contagion among ASEAN-5 exchange rates due to global shock of Covid-19 and the need for timely intervention to prevent the short run contagion turning into the long run.     

Network VAR models to measure financial contagion

Financial contagion among countries can arise from different channels, the most important of which are financial markets and bank lending. The paper aims to build an econometric network approach to understand the extent to which contagion spillovers (from one country to another) aris from financial markets, from bank lending, or from both. To achieve this aim we consider a model specification strategy which combines Vector Autoregressive models with network models. The paper contributes to the contagion literature with a model that can consider bank exposures and financial market prices, jointly and not only separately. From an empirical viewpoint, our results show that both bilateral exposures and market prices act as contagion channels in the transmission of shocks arising from a country to other countries.     

Relative risk aversion and the transmission of financial crises

We study how investor behavior affects the transmission of financial crises. If investors exhibit decreasing relative risk aversion, then negative wealth shocks increase the risk premium required to hold risky assets. We integrate this into a second generation model of currency crises which allows for contagion through changes in fundamentals. Investor behavior can be a transmission channel of financial crises, as changes in risk premia increase the coverage ratio and makes the defense of a peg less attractive for the policy maker. The feedback effect of the risk premia on the probability of devaluation also makes multiple equilibria more likely. The possible stabilization effects of capital controls and a Tobin tax on the international transmission of financial crises are also studied.     

The contagion effect of jump risk across Asian stock markets during the Covid-19 pandemic

This paper tests the market jump contagion hypothesis in the context of the Covid-19 pandemic. We first use a nonparametric approach to identify jumps by decomposing the realized volatility into continuous and jump components, and we use the threshold autoregressive model to describe the jump interdependency structure between different markets. We empirically investigate the contagion effect across several major Asian equity markets (Mainland China, Hong Kong, Japan, South Korea, Singapore, Thailand, and Taiwan) using the 5-minute high frequency data. Some key findings emerge: jump behaviors occur frequently and make an important contribution to the total realized volatility; jump dynamics exhibit significant nonlinearity, asymmetry, and the feature of structural breaks, which can be effectively captured by the threshold autoregressive model; jump contagion effects are obviously detected and this effect varies depending on the regime.     

A Primer on Financial Contagion

Abstract.  This paper presents a theoretical framework to highlight possible channels for the international transmission of financial shocks. We first review the different definitions and measures of contagion adopted by the literature. We then use a simple multi-country asset pricing model to classify the main elements of the current debate on contagion and provide a stylized account of how a crisis in one country can spread to the world economy. In particular, the model shows how crises can be transmitted across countries, without assuming ad hoc portfolio management rules or market imperfections. Finally, tracking our classification, we survey the results of the empirical literature on contagion.     

Identifying contagion

Identifying contagion effects during periods of financial crisis is known to be complicated by the changing volatility of asset returns during periods of stress. To untangle this we propose a GARCH (generalized autoregressive conditional heteroskedasticity) common features approach, where systemic risk emerges from a common factor source (or indeed multiple factor sources) with contagion evident through possible changes in the factor loadings relating to the common factor(s). Within a portfolio mimicking factor framework this can be identified using moment conditions. We use this framework to identify contagion in three illustrations involving both single and multiple factor specifications: to the Asian currency markets in 1997–1998, to US sectoral equity indices in 2007–2009 and to the CDS (credit default swap) market during the European sovereign debt crisis of 2010–2013. The results reveal the extent to which contagion effects may be masked by not accounting for the sources of changed volatility apparent in simple measures such as correlation.     

Did Vietnam stock market avoid the “contagion risk” from China and the U.S.? The contagion effect test with dynamic correlation coefficients

This paper examines the Vietnamese stock market with an extension of the recent investigation of risk contagion effects. Daily data spanning October 9, 2006–June 19, 2009 are sourced for the empirical validation of the risk contagion between the stock markets in Vietnam, China, and the U.S. To facilitate the validation of contagion effects with market related coefficients, this paper constructs a bivariable EGARCH model of dynamic condition correlation coefficients. First, we examine whether there are contagion effects when there is a financial crisis in the Vietnamese stock market. Next, we verify whether the contagion risk triggered by the crisis can affect the Vietnamese market and examine which market influences the Vietnamese market the most. We find that compared to the U.S. stock market, the Chinese stock market brings more contagion risk to the Vietnamese market, and these effects gain more significance after the sub-prime mortgage crisis.     

Contagion risk in the Czech financial system: A network analysis and simulation approach

This paper examines the potential for contagion within the Czech banking system via the channel of interbank exposures of domestic banks, enriched by a liquidity channel and an asset price channel, over the period March 2007 to June 2012. A computational model is used to assess the resilience of the Czech banking system to interbank contagion, taking into account the size and structure of interbank exposures as well as balance sheet and regulatory characteristics of individual banks in the network. The simulation results suggest that the potential for contagion due to credit losses on interbank exposures was rather limited. Even after the introduction of a liquidity condition into the simulations, the average contagion was below 3.8% of the remaining banking sector assets, with the exception of the period from December 2007 to September 2008. Activation of the asset price channel further increases the losses due to interbank contagion, showing that the liquidity of government bonds would be essential for the stability of Czech banks in stress situations. Finally, the simulation results for both idiosyncratic and multiple bank failure shocks suggest that the potential for contagion in the Czech banking system has decreased since the onset of the global financial crisis.     

Correlated risks vs contagion in stochastic transition models

This paper studies the problem of disentangling risk correlation and contagion in a set of individual binary processes. The two admissible values correspond to bad and good risk states of an individual. The risk correlation is captured by introducing a dynamic frailty, whereas the contagion passes through the effect of the lagged number of individuals in the bad risk state. We study carefully the dynamic properties of the joint process. Then, we focus on the limiting case of large populations (portfolios). The difficulty to identify risk correlation and contagion in finite samples is illustrated by means of Monte-Carlo simulations.     

在线渠道进入与实体渠道销售努力研究

本文在考虑服务效率以及实体渠道服务向在线渠道溢出的基础上,运用空间差异化的Hotelling模型,研究了在线渠道的进入对实体渠道销售努力的影响。研究表明,存在服务溢出时,在线渠道的进入在多数情况下将降低实体渠道的销售努力。但是,当实体渠道是高效率的销售服务提供商,并且服务向在线渠道的溢出效应较小时,在线渠道的进入将会增强实体渠道的销售努力,这时消费者可以从实体渠道那里得到更好的增值服务。     

浅析戴尔直销对我国IT产品营销渠道启示

论文简明扼要介绍了国内企业的营销渠道现状,总结各自的特点和运行效果,营销渠道在企业经营活动中的重要性。阐述营销渠道的概念、作用和意义;结合戴尔公司在中国市场营销渠道现状及其在营销渠道使用的中直销渠道策略,提出改善渠道关系,     

Region-wide connectedness of Asian equity and currency markets

This study systemically analyzes the dynamics of interdependence between the Asian equity and currency markets. The novelty of our study is that unlike other studies that explore either co-movements among equity markets or co-movements among currency markets, we pay particular attention to the interdependence between the two in terms of both return and volatility connectedness. We find that the contribution of crossspillovers between the Asian equities and currencies is substantial for the region-wide connectedness of both the returns and volatilities. We also find that the short-term spillovers are far more important for the return spillovers, while the long-term spillovers are far more important for the volatility spillovers, presumably reflecting the long-lasting effects of volatility shocks. All the results consistently underline the pivotal role of cross-interdependence between equity and currency markets, both as channels for integrating Asian financial markets and as sources of financial contagion across these markets. Our findings will provide useful guidance for portfolio risk management to adopt better hedging strategies for foreign exchange risks involved in the international investment of Asian equities.     

Endogenous search,price dispersion,and welfare

This paper studies the welfare cost of inflation in a frictional monetary economy with endogenous consumer search. Equilibrium entails price dispersion, where sellers compete for buyers by posting prices. We identify three channels through which inflation affects welfare. The real balance channel is the source of welfare loss. Its interaction with the price posting channel generates a welfare cost larger than Lucas (2000). The search channel reduces the welfare cost by more than one half through general equilibrium effect. The aggregate effect of these three channels on welfare is non-monotonic. Additionally, the welfare cost of inflation fluctuations is negligible.     

Inflation,financial development,and growth: A trilateral analysis

A large body of evidence links financial development to economic growth, yet the channels through which inflation affects this relationship and its stability have been less thoroughly explored. We take an econometric and graphical approach to examining these channels, and find that higher levels of financial development, combined with low-inflation, are related to higher rates of economic growth, especially in lower income countries, but that financial development loses much of its explanatory power in the presence of high-inflation. In particular, small increases in the price level seem able to wipe out relatively large growth effects of financial deepening when the annual rate of inflation lies between 4% and 19%, whereas the operation of the finance–growth link is less affected by inflation rates above this range. Growth is generally much lower, however, in such high-inflation settings where financial development is typically repressed.     

中国影子银行部门系统性风险的形成、影响与应对

本文分析了影子银行风险传染机制及其影响,在违约风险基于会计账户传染的马尔科夫过程假设下,运用投入产出法构建影子银行系统性风险测度模型,以2007-2012年中国影子银行业务数据进行检验,结果显示：信托公司部门是主要的风险源,银行部门是系统性风险最主要的承担者,观测期内影子银行部门系统性风险整体呈现上升趋势。防控系统性风险应从影子银行业务风险隔离机制、资本与杠杆率监管、信息透明度、宏观审慎框架和风险应急机制等建设着手。     

Green supply chain integration and financial performance: A social contagion and information sharing perspective

Although green supply chain integration (GSCI) has received wide attention, how it diffuses among supply chain members to affect the manufacturer's performance is still unclear. This study examines the relationships among GSCI, information sharing, and financial performance from a social contagion lens. By conceptualizing GSCI into three forms, two types of contagion mechanisms (i.e., cohesion and structural equivalence) were identified to investigate the underlying contagion effects between different forms of GSCI and the effects of various GSCI on information sharing and financial performance. Survey data were collected from 206 Chinese manufacturers and analyzed using structural equation modeling to test hypotheses. The results indicate that green supplier integration directly promotes green internal integration, green customer integration, and information sharing with suppliers. Green internal integration positively influences green customer integration and financial performance. Green customer integration enhances information sharing with customers. Both information sharing with suppliers and customers improve financial performance. This study contributes to the GSCI literature and provides novel managerial implications for manufacturers.     

Stablecoins as diversifiers,hedges and safe havens: A quantile coherency approach

This study investigates the diversifier, hedge and safe haven properties of stablecoins against various financial assets including cryptocurrencies such as Bitcoin, Ether, XRP and stock market indices. Using quantile coherency we show that stablecoins included in the study act as weak hedges in normal conditions and weak safe havens when considering moments of market turmoil and there is little evidence to support the existence of any contagion effects between the cryptocurrency and stablecoin markets. Aforementioned results are not significantly influenced by the choice of investment horizon. We further evaluate the implications of those results for the question of whether stablecoins are in fact stable.