Date of this Version

11-2007

Document Type

Journal Article

Publication Details

Khalid, A., and Rajaguru, G. (2007) The global impact of the Russian financial crisis: evidence using granger causality and impulse reponses in a VAR model

Working Paper Series; No. 12, Nov. 2007.

Copyright © Ahmed Khalid, Gulasekaran Rajaguru and The Globalisation and Development Centre, Bond University, 2007.

Abstract

This study attempts to investigate the financial market contagion in a global perspective. We use a large sample of 26 countries representing different regions in the world and focus on the spillover effects of the 1998 Russian crisis. We use daily observations on three financial market indicators namely, the exchange rates, stock prices and interest rates. We construct a VAR to test the interlinkages among different market and different regions using the Granger causalfiy. Later, we perform impulse response analysis by introducing a shock in each of the Russian market and observe the impact and duration of this shock on other global markets. The evidence suggests that most of the exchange rates and stock prices within and across the regions are strongly linked and may have had provided a channel for contagion during the 1998 Russian crisis. However, the evidence for interest rate linkages is less supportive.