TY  - JOUR
AU  - Forbes,Kristin
AU  - Rigobon,Roberto
TI  - Contagion in Latin America: Definitions, Measurement, and Policy Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7885
PY  - 2000
Y2  - September 2000
UR  - http://www.nber.org/papers/w7885
L1  - http://www.nber.org/papers/w7885.pdf
N1  - Author contact info:
Kristin Forbes
MIT Sloan School of Management
100 Main Street, E62-416
Cambridge, MA  02142
Tel: 617/253-8996
Fax: 617/258-6855
E-Mail: kjforbes@mit.edu

Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu
AB  - This paper analyzes bond and stock markets in Latin America and uses these patterns to investigate whether contagion occurred in the 1990's.  It defines  shift-contagion' as a significant increase in cross-market linkages after a shock to one country or region.  Several coin-toss examples and a simple model show that the standard tests for contagion are biased due to the presence of heteroscedasticity, endogeneity, and omitted-variable bias. Recent empirical work which addresses these problems finds little evidence of shift-contagion during a range of crisis periods. Instead, this work argues that many countries are highly interdependent' in all states of the world and the strong cross-country linkages which exist after a crisis are not significantly different than those during more stable periods.  These findings have a number of implications for Latin America.
ER  -