A regime switching skew-normal model of crises and contagion
|Collections||ANU College of Asia & the Pacific|
|Title:||A regime switching skew-normal model of crises and contagion|
|Author(s):||McKibbin, Renee Anne|
Chan, Joshua C.C.
Hsiao, Cody Yu-Ling
regime switching skew-normal model
Bayesian model comparison
|Publisher:||College of Asia and the Pacific, The Australian National University|
|Citation:||McKibbin, R.A. et al.(2013). A regime switching skew-normal model of crises and contagion. Centre for Applied Macroeconomic Analysis Crawford School of Public Policy ANU College of Asia & the Pacific Working Papers 15/2013. Canberra, ACT: Crawford School of Public Policy, The Australian National University|
A regime switching skew-normal model for nancial crisis and contagion is proposed in which we develop a new class of multiple-channel crisis and con- tagion tests. Crisis channels are measured through changes in own moments of the mean, variance and skewness, while contagion is through changes in the correlation and co-skewness of the joint distribution of asset returns. In this framework: i) linear and non-linear dependence is allowed; ii) transmission chan- nels are simultaneously examined; iii) crisis and contagion are distinguished and individually modeled; iv) the market that a crisis originates is endogenous; and v) the timing of a crisis is endogenous. In an empirical application, we apply the proposed model to equity markets during the Great Recession using Bayesian model comparison techniques to assess the multiple channels of crisis and conta- gion. The results generally show that crisis and contagion are pervasive across Europe and the US. The second moment channels of crisis and contagion are systematically more evident than the rst and third moment channels.
|McKibbin_ARegimeSwitching_2013.pdf||307.55 kB||Adobe PDF|
Items in Open Research are protected by copyright, with all rights reserved, unless otherwise indicated.