Is China a source of financial contagion?

Article

Akhtaruzzaman, Md, Abdel-Qader, Waleed, Hammami, Helmi and Shams, Syed. 2021. "Is China a source of financial contagion?" Finance Research Letters. 38, pp. 1-13. https://doi.org/10.1016/j.frl.2019.101393
Article Title

Is China a source of financial contagion?

ERA Journal ID19543
Article CategoryArticle
AuthorsAkhtaruzzaman, Md (Author), Abdel-Qader, Waleed (Author), Hammami, Helmi (Author) and Shams, Syed (Author)
Journal TitleFinance Research Letters
Journal Citation38, pp. 1-13
Article Number101393
Number of Pages13
Year2021
Place of PublicationUnited States
ISSN1544-6123
1544-6131
Digital Object Identifier (DOI)https://doi.org/10.1016/j.frl.2019.101393
Web Address (URL)https://www.sciencedirect.com/science/article/abs/pii/S1544612319310402
Abstract

The study examines the role China plays compared with the US in transmitting contagion to South Asia. Trade intensity, economic downturns, and negative net equity capital outflows positively influence dynamic conditional correlations between South Asian and US/Chinese financial stock returns. Chinese and US financial firms transmitted more spillovers than they received during the global financial crisis. Results are robust to the use of USD or local currency returns, and the alternative specification of the Diebold–Yilmaz model. The role of Chinese financial firms in transmitting shocks to South Asia may be of interest to policymakers, regulators, and other market participants.

KeywordsFinancial contagion; Spillover index; Dynamic conditional correlation; Business cycle; Trade intensity
ANZSRC Field of Research 2020350202. Finance
Byline AffiliationsAustralian Catholic University
Rennes School of Business, France
University of Southern Queensland
Institution of OriginUniversity of Southern Queensland
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