IMF Working Papers

Measuring Contagion with a Bayesian Time-Varying Coefficient Model

By Alessandro Rebucci, Matteo Ciccarelli

September 1, 2003

Download PDF

Preview Citation

Format: Chicago

Alessandro Rebucci, and Matteo Ciccarelli. Measuring Contagion with a Bayesian Time-Varying Coefficient Model, (USA: International Monetary Fund, 2003) accessed November 21, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We propose using a Bayesian time-varying coefficient model estimated with Markov chain-Monte Carlo methods to measure contagion empirically. The proposed measure works in the joint presence of heteroskedasticity and omitted variables and does not require knowledge of the timing of the crisis. It distinguishes contagion not only from interdependence but also from structural breaks and can be used to investigate positive as well as negative contagion. The proposed measure appears to work well using both simulated and actual data.

Subject: Currencies, Currency markets, Exchange rates, Expenditure, Financial markets, Foreign exchange, Metal prices, Money, Prices, Public expenditure review

Keywords: Chilean peso, Contagion, Correlation coefficient, Cross-market correlation, Cross-market linkage, Currencies, Currency markets, Estimation procedure, Exchange rates, Foreign exchange market reaction, Gibbs sampling, Global, Heteroskedasticity, Metal prices, OLS estimate, Omitted variable bias, Public expenditure review, Time-varying coefficient models, U.S. dollar, WP

Publication Details

  • Pages:

    32

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2003/171

  • Stock No:

    WPIEA1712003

  • ISBN:

    9781451858525

  • ISSN:

    1018-5941

You May Also Be Interested In...

Kiribati: Agricultural Subsidies for Copra: Improving Efficiency and Equity and Balancing Trade-offs

November 21, 2024

Unlocking Adaptation Finance in Emerging Market and Developing Economies

November 19, 2024

EBA-Lite 3.0 Model and Methodology

November 18, 2024

Quarterly Projection Model for the Bank of Ghana: Extensions and Applications

November 15, 2024