On the Identification of Interdependence and Contagion of Financial Crises

Emanuele Bacchiocchi

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: In this paper we propose a new framework for modeling heteroskedastic structural vector autoregressions. Although it is general enough to find potential applications in many empirical economic fields, it reveals to be well suited in the distinction between interdependence and contagion in the literature related to the transmission of financial crises. The identification of the structural parameters is obtained by exploiting the heteroskedasticity in the data, naturally arising during crisis periods. More precisely we provide identification conditions when both heteroskedasticity and traditional restrictions on the parameters are jointly considered. Finally, this methodology is used to investigate the relationships between sovereign bond yields for some highly indebted EU countries.

Keywords: Heteroskedasticity; Identification; Interdependence; Contagion; Highly Indebted EU Countries; Financial Crisis (search for similar items in EconPapers)
JEL-codes: C01 C13 C30 C51 (search for similar items in EconPapers)
Date: 2015-07-15
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Journal Article: On the Identification of Interdependence and Contagion of Financial Crises (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2015-12

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