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Title:Stock market integration between three CEECs, Russia and the UK PDF Logo
Authors:Caporale, Guglielmo Maria
Spagnolo, Nicola
Issue Date:2010
Series/Report no.:CESifo working paper Monetary Policy and International Finance 2978
Abstract:This paper estimates a tri-variate VAR-GARCH(1,1)-in-mean model to examine linkages between the stock markets of three Central and Eastern European countries (CEECs), specifically the Czech Republic, Hungary, and Poland, and both the UK and Russia. The adopted framework allows to analyse interdependence by estimating volatility spillovers, and also contagion by testing for possible shifts in the transmission of volatility following the introduction of the euro and EU accession. Further evidence on possible changes in the transmission mechanism (namely, on whether there is contagion) can be obtained by examining the conditional correlations implied by the estimated model over different time periods. The empirical findings suggest that there is significant co-movement (interdependence) of these CEEC markets with both the Russian and the UK ones. Furthermore, whilst the introduction of the euro has had mixed effects, EU accession has resulted in an increase in volatility spillovers between the three CEECs considered and the UK (contagion).
Subjects:Central and Eastern European countries (CEECs)
volatility spillovers
interdependence
contagion
VAR-GARCH-in-mean model
JEL:C32
F36
G15
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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