Contagion, Channels of Shock Transmission and Structure of Channel Performance
Contagion among countries and sectors when a financial crisis breaks out is currently under scrutiny. The existing literature focuses on establishing the existence of contagion among equity markets but relatively little attention is devoted to examining which channels spread the shock to individual sectors. This study extends the literature by estimating a time-series of contagion for sectors identified as contagious, investigating three potential channels of shock transmission and investigating the role of the channels as the severity of contagion increases. Using data for 16 emerging markets and nine industrial sectors for the 2007-2009 financial crisis, we find that the global channel provides a mechanism that stabilizes and mitigates contagion while the country channel is the primary force encouraging contagion and the sector channel is ineffective. We also find the role of each channel may change as the severity of contagion increases.
DegreeMaster of Science (M.Sc.)
DepartmentEdwards School of Business
CommitteeTannous, George; Wilson, Craig; Chaban, Maxym
Copyright DateNovember 2014
Contagion, channels of contagion transmission, structure of contagion