Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
964312 | Journal of International Money and Finance | 2010 | 14 Pages |
Abstract
This paper applies the multivariate version of the Forbes and Rigobon (2002) contagion test, as proposed by Dungey et al. (2005a), to detect contagion effects in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). Crisis and non-crisis observations are determined endogenously via a Markov-switching vector autoregression (MSVAR). We show that the MSVAR is suitable for this purpose, as it does particularly well in identifying the 11 realignments of the ERM. We examine whether Denmark’s rejection of the Maastricht Treaty and Italy’s competitiveness problems affected other EMS participants and find evidence for contagion.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Alex Mandilaras, Graham Bird,