On the stability of domestic financial market linkages in the presence of time-varying volatility |
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Institution: | 1. Department of Economics, Finance and Accounting, NUI Maynooth, Ireland;2. Department of Statistics and Insurance Science, University of Piraeus, Greece;3. Department of Economics and Related Studies, University of York, UK |
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Abstract: | We analyze the stability of domestic financial linkages between periods of calm and turbulent market conditions. Our model develops a simultaneous test of shift contagion and bi-directional pure contagion, which is applied to the equity and currency markets of a group of East Asian emerging economies. Our results show a great deal of instability in these markets with widespread evidence of pure contagion in both directions. There is less evidence of shift contagion with the transmission of common shocks unchanged between regimes for the majority of countries. |
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