Sectoral dynamics of financial contagion in Europe - The cases of the recent crises episodes

Alexakis, Christos and Pappas, Vasileios (2018) Sectoral dynamics of financial contagion in Europe - The cases of the recent crises episodes. Economic Modelling, 73 . pp. 222-239. ISSN 0264-9993. (doi:https://doi.org/10.1016/j.econmod.2018.03.018) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided)

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Abstract

In this paper, we investigate the existence of financial contagion in the European Union during the recent Global Financial Crisis (GFC) of 2007-2009 and the European Sovereign Debt Crisis (ESDC) that started in 2009. Our sample includes sectorial equity indices for 15 countries from 2004 to 2014. We adopt an ADCC-GJR-GARCH model for the time-varying correlations and a Markov-Switching model to identify the lead/lag relationship in crisis transition dates across the countries and the sectors. We assess the patterns of financial contagion by sector and by country. Our results support the existence of financial contagion in all business sectors under the GFC and the ESDC. Financials and Telecommunications are the most affected, while the Industrials and the Consumer Goods the least in each crisis respectively. Stock markets in the Core EU are the most affected in both crises. We find evidence of a non-synchronized transition of all countries to the crisis regime, in both crises. We believe that our results may provide useful insights for investors and policy makers.

Item Type: Article
Uncontrolled keywords: Contagion; Global Financial Crisis; European Sovereign Debt Crisis
Subjects: H Social Sciences
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Vasileios Pappas
Date Deposited: 11 Apr 2018 09:52 UTC
Last Modified: 14 Aug 2018 11:53 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/66685 (The current URI for this page, for reference purposes)
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