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Contagion, spillover, and interdependence

Rigobón, Roberto (2019) Contagion, spillover, and interdependence. Economía, 19 (2). 69 - 99. ISSN 1529-7470

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Identification Number: 10.1353/eco.2019.0002

Abstract

This paper reviews the empirical literature on international spillovers and contagion. Theoretical models of spillover and contagion imply that the reduced-form observable variables suffer from two possible sources of bias: endogeneity and omitted variables. These econometric problems, in combination with the heteroskedasticity that plagues the data, produce time-varying biases. Several empirical methodologies are evaluated from this perspective: nonparametric techniques, such as correlations and principal components; and parametric methods, such as OLS, VAR, event studies, ARCH, and nonlinear regressions. The paper concludes that there is no single technique that can solve the full-fledged problem and discusses three methodologies that can partially address some of the questions in the literature.

Item Type: Article
Official URL: https://economia.lse.ac.uk/
Additional Information: © 2019 LACTEA
Divisions: LSE
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C30 - General
F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C10 - General
Date Deposited: 03 Jul 2024 15:54
Last Modified: 05 Dec 2024 00:48
URI: http://eprints.lse.ac.uk/id/eprint/123173

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