This study suggests an alternative approach to the transmission process of financial crises across emerging economies. This paper hypothesizes that the interdependence effect could become weaker, disappears completely or swerves during the crisis period due to the contagion phenomenon. The hypothesis put forward in this paper is of great importance in terms of policy implications inasmuch as it is supported by the data for many cases.
Amemiya, T., 1977. The maximum likelihood and the nonlinear three-stage least squares estimator in the general nonlinear simultaneous equation model. Econometrica, 45(4): 955-968.
Dhrymes, P.J., 1973. Small sample and asymptotic relations between maximum likelihood and three stage least squares estimators. Econometrica, 41(2): 357-364.
Dornbusch, R., Y.C. Park and S. Claessens, 2000. Contagion: Understanding how it spreads. World Bank Research Observer, 152(2): 177-197.
Eichengreen, B., A. Rose and C. Wyplosz, 1996. Contagious currency crises: First tests. Scandinavian Journal of Economics, 98(4): 463-484.
Favero, C.A. and F. Giavazzi, 2002. Is the international propagation of financial shocks non-linear? Journal of International Economics, 57(1): 231-246.
Forbes, K.J. and R. Rigobon, 2002. No contagion, only interdependence: Measuring stock market co-movements. Journal of Finance, 57(5): 223-2261.
Hausman, J.A., 1975. An instrumental variable approach to full information estimators for linear and certain nonlinear econometric models. Econometrica, 43(4): 727-738.
Korkmaz, A., 2012. An alternative perspective on the contagion phenomenon. International Journal of Economics, 6(1): 89-102.
Masson, P., 1998. Contagion: Monsoonal effects, spillovers, and jumps between multiple equilibria. International Monetary Fund Working Paper No. 98/142.
Masson, P., 1999a. Contagion: Monsoonal effects, spillovers, and jumps between multiple equilibria, in: Age´nor, P.R., Miller, M., Vines, D., Weber, A. (Eds.), The Asian financial crisis: Causes, contagion and consequences. Cambridge: Cambridge University Press. pp: 265-279.
Masson, P., 1999b. Contagion: Macroeconomic models with multiple equilibria. Journal of International Money and Finance, 8(4): 587- 602.
Pesaran, H. and A. Pick, 2007. Econometric issues in the analysis of contagion. Journal of Economic Dynamics & Control, 31(4): 1245-1277.
Zellner, A. and H. Theil, 1962. Three-stage least squares: Simultaneous estimation of simultaneous equations. Econometrica, 30(1): 54-78.