International financial contagion of the US sub-prime crisis: evidence through the adjusted correlation test and non-linear Error Correction Models (ECM). (1st April 2011)

• Record Type: Journal Article
• Authors: Omri, Anis; Ghorbel-Zouari, Sonia
• Is Part Of: International journal of monetary economics and finance. Volume 4:Number 2(2011)
• Page Start: 135
• Page End: 149
• Publication Date: 2011-04-01
• Subjects: sub-prime mortgages -- financial crises -- international contagion -- adjusted correlation tests -- nonlinear error correction models -- USA -- United States -- market coefficients -- non-linearity -- propagation mechanisms -- propagation shocks -- long-term interdependence -- financial markets -- risk perceptions -- risk measurement -- France -- Germany -- Japan -- UK -- United Kingdom -- monetary economics -- finance; Monetary policy -- Periodicals; Finance -- Periodicals; Economics -- Mathematical models -- Periodicals; 332.4
• Languages: English
• ISSNs: 1752-0479

Abstract

In this essay, we test the presence of the contagion phenomenon during the US sub-prime crisis. We adopt the test of adjusted correlation coefficients between markets and propose a new procedure which involves testing the non-linearity of the propagation mechanisms shocks, estimated with a model of long-term interdependence. We apply this methodology to the financial markets which measure the risk perception. Our results conclude "some contagion, some interdependence" between the financial markets of USA, France, Germany, Japan and UK during the current crisis.