Financial Contagion and the Real Economy

34 Pages Posted: 18 Aug 2010

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

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Date Written: August 17, 2010

Abstract

This paper analyzes the incidences of sector-specific contagion during the Global Financial Crisis of 2007-2009. The empirical analysis comprising ten sectors in 25 major developed and emerging stock markets shows that the crisis led to an increased co-movement of returns and thus contagion among financial sector stocks across countries and between financial sector stocks and real economy stocks both across countries and within a country. The results demonstrate that multiple sectors were infected in most countries and that no country was immune to the adverse effects of the crisis. The results provide information on the effectiveness of governments’ stimulus packages to limit the spreading of a financial crisis.

Keywords: contagion, stock market contagion, sector contagion, financial crisis, financial crisis definition, crisis period identification

JEL Classification: F30, F36, G01, G14, G15

Suggested Citation

Baur, Dirk G., Financial Contagion and the Real Economy (August 17, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper, Available at SSRN: https://ssrn.com/abstract=1660316 or http://dx.doi.org/10.2139/ssrn.1660316

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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