Measuring Contagion and Interdependence with a Bayesian Time-Varying Coefficient Model: An Application to the Chilean Fx Market During the Argentine Crisis

Posted: 16 Jun 2008

See all articles by Matteo Ciccarelli

Matteo Ciccarelli

European Central Bank (ECB)

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: Spring 2007

Abstract

We use a Bayesian time-varying coefficient model to measure contagion and interdependence, and we apply it to the Chilean FX market during the 2001 Argentine crisis. The proposed framework works in the joint presence of heteroskedasticity and omitted variables, without knowledge of the crisis timing prior to the empirical analysis. It can distinguish between contagion and interdependence, as well as between unusually strong or weak market comovements. In a natural experiment based on our application, we find that the proposed framework works well in practice. In the application, we find evidence of some contagion from Argentina and some interdependence with Brazil.

Keywords: Argentine crisis, Chile, contagion, interdependence, omitted variables, time-varying coefficient models

Suggested Citation

Ciccarelli, Matteo and Rebucci, Alessandro, Measuring Contagion and Interdependence with a Bayesian Time-Varying Coefficient Model: An Application to the Chilean Fx Market During the Argentine Crisis (Spring 2007). Journal of Financial Econometrics, Vol. 5, Issue 2, pp. 285-320, 2007, Available at SSRN: https://ssrn.com/abstract=1145515 or http://dx.doi.org/10.1093/jjfinec/nbm003

Matteo Ciccarelli (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alessandro Rebucci

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
444
PlumX Metrics