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| Corsetti, Giancarlo; Pericoli, Marcello; Sbracia, Massimo. |
| This paper builds a general test of contagion in financial markets based on bivariate correlation analysis a test that can be interpreted as an extension of the normal correlation theorem. Contagion is defined as a structural break in the data generating process of rates of return. Using a factor model of returns as theoretical framework, we nest leading contributions in the literature as special cases of our test. We show that, while the literature on correlation analysis of contagion is successful in controlling for a potential bias induced by changes in the variance of global shocks, current tests are conditional on a specific yet arbitrary assumption about the variance of country specific shocks. Our results suggest that, for a number of pairs of... |
| Tipo: Working or Discussion Paper |
Palavras-chave: Contagion; Financial crisis; Correlation analysis; Financial Economics; F30; C10; G10; G15. |
| Ano: 2001 |
URL: http://purl.umn.edu/28420 |
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| Corsetti, Giancarlo; MacKowiak, Bartosz. |
| We study the interaction of fiscal and monetary policies during a currency crisis in an economy with government nominal liabilities. We show that the stock and maturity of these liabilities are key determinants of the magnitude, timing and predictability of a devaluation. Among notable features of our model, monetary authorities defend the currency parity conditional on the level of the interest rate, rather than on the stock of international reserves; budget deficits need not be high before a currency crisis; postdevaluation inflation may exhibit little persistence, and money demand need not fall after the crisis. |
| Tipo: Working or Discussion Paper |
Palavras-chave: Currency crisis; Speculative attacks; Fiscal policy; Financial Economics; F31; F33; E58. |
| Ano: 2000 |
URL: http://purl.umn.edu/28516 |
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