Interdependence and contagion in the period of crisis

Abstract

Purpose The purpose of this paper is to investigate whether the relationship of interdependence and contagion between BRICS countries and emerging non-BRICS countries is similar to that observed between developed countries and emerging BRICS countries. Design/methodology/approach The authors analyzed 15 markets: 5 BRICS, 5 developed (USA, Japan, Germany, England and France) and 5 emerging markets (Mexico, Indonesia, Turkey, Iran and Poland). Based on the time series of returns of the main stock indexes of each country, referring to the period from 2008 to 2018, the authors applied Granger causality tests, vector auto-regression and the dynamic conditional correlation-GARCH model. Findings The results led to the rejection of the main hypothesis and showed adherence to the behaviors predicted in the literature for the relations between the groups of markets. Originality/value This paper, besides analyzing the interdependence between markets in times of crisis, analyzes the effect of contagion between developed and emerging markets.