Influence of the American Financial Market on Other Markets During the Subprime Crisis

Open access

Abstract

Subprime crisis which started in the USA in 2007 was the cause of the most significant economic disturbances since the Great Depression in 1930s. Soon it transmitted to other countries, including those in which banks were not engaged in the subprime mortgage market. The crisis hit various sectors of national economies and led to changing of the trends on the stock markets, which are connected to American capital market. In the following article we researched the influence of the American market on the other markets in the context of the financial crisis. Our analysis is based on the results obtained from the multivariate parametric models. Seeing that the data space is high-dimensional, we used GO-GARCH models introduced by van der Weide (2005) and Boswijk and van der Weide (2006).

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Alexander C.O. (2000). Orthogonal Methods for generating Large Positive Semidefinite CovarianceMatrices. ISMA Centre Disscussion Papers in Finance 2000-2006 University of Reading UK.

  • Alexander C.O. (2001). Orthogonal GARCH in C.O. Alexander (Ed.) Mastering Risk 2 Financial Times Prentice Hall.

  • Alexander C.O. & Chibumba A. (1996) Multivariate orthogonal factor GARCH. University of Sussex Discussion Paper in Mathematics.

  • Blackburn R. (2008). The Subprime Crisis. New Left Review 50 March April.

  • Bollerslev T. (1990) Modelling the Coherence in Short-Run Nominal Exchange Rate: A Multivariate Generalized ARCH Approach. Review of Economics and Statistic 72 498-505.

  • Boswijk H. & van der Weide R. (2006). Wake me up before you GO-GARCH. UvA-Econometrics Discussion Paper 2006/03.

  • Engle R. (2002). Dynamic Conditional Correlation - a simple class of Multivariate GARCH models. Journal of Business and Economic Statistic 20 339-350.

  • Engle R. & Kroner F. (1995). Multivariate simultaneous generalized ARCH. EconometricTheory 11 122-150.

  • Financial Services Authority (2009). The Turner Review. A regulatory response to the globalbanking crisis March www.fsa.gov.uk (31.01.2011).

  • Haffner C.M. & Herwartz H. (1998). Volatility Impulse Response Functions for MultivariateGARCH Models. CoreDiscussion Paper 9847.

  • Johansen S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica 59 (6) 1551-1580.

  • Klassen F. (2000) Have Exchange Rates Become Mode Closely Tied? Evidence from a newMultivariate GARCH model. Centre for Economic Research discussion paper University of Tilburg.

  • Kliber A. Kliber P. & Płuciennik P. (2012) Dependencies between interbank interest rates in Poland (in Polish). Przegląd Statystyczny 2012-II 151-164.

  • Konopczak M. Sieradzki R. & Wiernicki M. (2010). Global financial markets crisis - impact on the Polish financial market and implications for the real sector of the economy (in Polish). Bank i Kredyt 41 (6) 45-70.

  • Laurent S. (2009) G@RCH 6 Estimating and Forecasting ARCH Models. London: Timberlake Consultants Press.

  • Mishkin F. (2011) Over the Cliff: From the Subprime to the Global Financial Crisis. Journalof Economic Perspectives 25 (1) Winter 2011 49-70.

  • Schwarz K. (2009) Mind the gap: disentangling credit and liquidity in risk spreads working paper of University of Pennsylvania Wharton School of Business.

  • Sengupta R. & Yu M.T. (2008). The LIBOR-OIS Spread as a Summary Indicator. EconomicSynopses 25 Federal Reserve Bank of St. Louis.

  • The World Bank (2010). Growth throught Innovations. Malaysia Economic Monitor.

  • Thornton D.L. (2009) What the Libor-OIS Spread Says. Economic Synopses 24 Federal Reserve Bank of St. Louis.

  • Tudor C. (2009) Understanding the Roots of the US Subprime Crisis and its Subsequent Effects. The Romanian Economic Journal Year XII 31 (1).

  • Vojtek M. (2003). Calibration of interest rate models - transition markets case. CERGE-EI Discussion Paper Series. van der Weide R. (2002). GO-GARCH: A Multivariate Generalized Orthogonal GARCH Model. Journal of Applied Econometrics 17 549-564.

Search
Journal information
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 146 72 2
PDF Downloads 80 51 2