Fatal attraction: Using distance to measure contagion in good times as well as bad

Giorgio Fazio, Manmohan Kumar, Tamim Bayoumi, Ronald Macdonald

Risultato della ricerca: Article

19 Citazioni (Scopus)

Abstract

This paper proposes a new measure of contagion that is good at anticipating future vulnerabilities. Building on previous work, it uses correlations of equity markets across countries to measure contagion, but in a departure from previous practice measures contagion using the relationship of these correlations with distance. Also in contrast to previous work, our test is good at identifying periods of "positive contagion," in which capital flows to emerging markets in a herd-like manner largely unrelated to fundamentals. Identifying such periods of "fatal attraction" is important as they provide the essential ingredients for subsequent crises and rapid outflows of capital.
Lingua originaleEnglish
pagine (da-a)259-273
Numero di pagine15
RivistaReview of Financial Economics
Volume16
Stato di pubblicazionePublished - 2007

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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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