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On the Identification of Interdependence and Contagion of Financial Crises
Author(s) -
Bacchiocchi Emanuele
Publication year - 2017
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/obes.12188
Subject(s) - heteroscedasticity , identification (biology) , economics , econometrics , financial contagion , financial crisis , bond , financial market , transmission channel , transmission (telecommunications) , macroeconomics , computer science , finance , telecommunications , botany , biology
In this paper we propose a new framework for modelling heteroskedastic structural vector autoregressions. 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 heteroskedasticity and traditional restrictions on the parameters are jointly considered. Although the framework is general enough to find potential applications in many empirical economic fields, it proves to be well suited for distinguishing between interdependence and contagion in the literature related to the transmission of financial crises. This methodology is used to investigate the relationships between sovereign bond yields for some highly indebted EU countries.