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In the framework of the current global economic crisis, a pertinent question is whether the world economies are suffering from contagion or interdependency effects. With its origins in the US sub-prime mortgage market crisis starting at the end of 2007, when a loss of confidence by investors in the value of securitized mortgages resulted in a liquidity crisis, hard-hitting the banking system and rapidly spreading into the financial markets, the effects of the crisis were automatically reflected in the rest of the world economies. These effects that become severe as the rest of the world has been facing its economic and financial system instability. Therefore, the American shock can be seen as the trigger that revealed the other economies’ own financial problems. This paper’s main finding shows that the US stock markets are not generating contagious effects into the Asian stock markets. However, strong evidence suggesting volatility transmissions derived from these economies interlinkages has been detected.
Morales, L., Andresso-O'Callaghan, B.: The current global financial crisis: do Asian stock markets show contagious or interdependency effects? XVth Euro-Asia Conference at Pau, 10 & 11 September, 2009.