Measuring Contagion with a Bayesian Time-Varying Coefficient Model

Download or read book Measuring Contagion with a Bayesian Time-Varying Coefficient Model written by Matteo Ciccarelli and published by . This book was released on 2006 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose using a Bayesian time-varying coefficient model estimated with Markov chain-Monte Carlo methods to measure contagion empirically. The proposed measure works in the joint presence of heteroskedasticity and omitted variables and does not require knowledge of the timing of the crisis. It distinguishes contagion not only from interdependence but also from structural breaks and can be used to investigate positive as well as negative contagion. The proposed measure appears to work well using both simulated and actual data.