@techreport{NBERw7797,
 title = "Looking for Contagion: Evidence from the ERM",
 author = "Carlo A. Favero and Francesco Giavazzi",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "7797",
 year = "2000",
 month = "July",
 URL = "http://www.nber.org/papers/w7797",
 abstract = {This paper applies a full-information technique to test for the presence of contagion across the money markets of ERM member countries.  We show that whenever it is possible to estimate a model for interdependence, a test for contagion based on a full information technique is more powerful.  We test for the presence of contagion after having identified episodes of country-specific shocks, whose effects on other European markets are significantly different from those predictable from the estimated channels of interdependence.  Using data on three-months interest rate spreads on German rates for seven countries over the period 1988-1992, we are unable to reject the null of contagion.  Our evidence suggest that contagion within the ERM was a general phenomenon, not limited to a subset of weaker countries, the exception in the sample being France.  Our results are mute as to the question of what lies behind these episodes of contagion; they show, however, that it is not always true that one only detects contagion when one applies poor statistical techniques.},
}