Interdependence and contagion in the period of crisis

Abstract

Purpose

The purpose of this paper is to investigate whether the relationship of interdependence and contagion between BRICS countries and emerging non-BRICS countries is similar to that observed between developed countries and emerging BRICS countries.

Design/methodology/approach

The authors analyzed 15 markets: 5 BRICS, 5 developed (USA, Japan, Germany, England and France) and 5 emerging markets (Mexico, Indonesia, Turkey, Iran and Poland). Based on the time series of returns of the main stock indexes of each country, referring to the period from 2008 to 2018, the authors applied Granger causality tests, vector auto-regression and the dynamic conditional correlation-GARCH model.

Findings

The results led to the rejection of the main hypothesis and showed adherence to the behaviors predicted in the literature for the relations between the groups of markets.

Originality/value

This paper, besides analyzing the interdependence between markets in times of crisis, analyzes the effect of contagion between developed and emerging markets.

Citation

Santos, C.M.d., Gaio, L.E., Pimenta Junior, T. and Cicconi, E.G. (2019), "Interdependence and contagion in the period of crisis", International Journal of Emerging Markets, Vol. 14 No. 5, pp. 1013-1031. https://doi.org/10.1108/IJOEM-05-2018-0216