Contagion, spillover, and interdependence

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

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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:	07 Nov 2024 04:57
URI:	http://eprints.lse.ac.uk/id/eprint/123173

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