Contagion in international bond markets during the Russian and the LTCM crises

By Mardi Dungey, Renée Fry, Brenda González-Hermosillo, Vance L. Martin. 2006

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Abstract The Russian bond default in August 1998 and the long-term capital management (LTCM) recapitalization announcement in the following month represent an unusual period of volatility in international bond markets with bond spreads increasing dramatically across the globe. Using a latent factor model and a new data set spanning bond markets across Asia, Europe and the Americas, we quantify the contribution of contagion to the spread of these two crises. The maximum amount of contagion experienced by any of the countries investigated is about 17% of total volatility in bond spreads, with the main effects due to the Russian crisis. The results also show that both emerging and developed markets experienced contagion during the period.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/ec76713e9b8271e3a8d73d68f6a1d9ff5e0d0fcd

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Citations in the corpus

Flights and Contagion - an Empirical Analysis of Stock-Bond Correlations (2009, background): “…are analyzed in more detail in the literature (e.g. see Baig and Goldfajn, 1999, Forbes and Rigobon, 2002 and Roubini, 1998 for the Asian crisis, Dungey et al. (2006) for the Russian crisis, Hon et al. (2004) for September 11, Gillan and Martin (2002) for Enron and Akhigbe, Martin and Whyte,…”