Spillover effects from China and the US to global emerging markets: a dynamic analysis

Mpoha, Salifya and Bonga-Bonga, Lumengo (2021): Spillover effects from China and the US to global emerging markets: a dynamic analysis.

Abstract

The 2008/2009 Global Financial Crisis has accentuated the number of studies on contagion among researchers seeking to unravel the factors behind its impacts, effects and mechanisms. Several methodologies have been proposed to differentiate between contagion and other phenomenon related to the cross transmission of shocks. However, few studies distinguish between the sources of transmission of shocks and their effects on different emerging markets when analysing contagion phenomenon. This paper contributes to the literature by assessing dynamic spillover effects from two key markets (China and the U.S) to six major emerging economies from different regions making use of the wavelet analysis. The results support the presence of contagion during selected crisis periods and suggest variation in market response for each emerging market as well as shock source. The results of the paper show the heterogenous reactions of emerging markets from spillover shocks of different sources and provide useful insight to investors and asset managers seeking to diversify portfolios within the selected emerging markets as well as policy makers in establishing stronger regulations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Shift Contagion, Interdependence, Wavelet Analysis, Emerging Economies, China, U.S, Maximal Overlap Discrete Wavelet Transform (MODWT), Continuous Wavelet-Transform (CWT), Wavelet Coherence, Wavelet Correlation.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C58 - Financial Econometrics; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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