Network analysis of exchange data: interdependence drives crisis contagion |
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Authors: | David Matesanz Guillermo J Ortega |
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Institution: | 1. Applied Economics Department, University of Oviedo, Oviedo, Spain 2. Science and Technology Department, Universidad Nacional de Quilmes and CONICET, Buenos Aires, Argentina
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Abstract: | In this paper, we examine linear and nonlinear co-movements that appear in the real exchange rates of a group of 28 developed and developing countries. The matrix of Pearson correlation and Phase Synchronous coefficients have been used in order to construct a topology and hierarchy of countries by using the Minimum Spanning Tree (MST). In addition, the MST cost and global correlation coefficients have been calculated to observe the co-movements’ dynamics throughout the time sample. By comparing Pearson and Phase Synchronous information, a new methodology is emphasized; one that can uncover meaningful information pertaining to the contagion economic issue and, more generally, the debate surrounding interdependence and/or contagion in financial time series. Our results suggest some evidence of contagion in the Asian currency crises; however, this contagion is driven by previous and stable interdependence. |
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