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Contagion in International Bond Markets During the Russian and LTCM crises

journal contribution
posted on 2023-05-16, 23:39 authored by Dungey, MH, Fry, R, Gonzalez-Hermosillo, B, Martin, V
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. © 2006 Elsevier B.V. All rights reserved.

History

Publication title

Journal of Financial Stability

Pagination

1-27

ISSN

1572-3089

Department/School

TSBE

Publisher

Elsevier Inc.

Place of publication

United States

Repository Status

  • Restricted

Socio-economic Objectives

Monetary policy

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