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Journal of Financial Stability Vol. 2 No. 1 2006

Contagion in international bond markets during the Russian and the LTCM crises

Mardi Dungey1,2,3; Renée Fry; Brenda González-Hermosillo; Vance L. Martin4

1 Cambridge Environmental Research Consultants (United Kingdom) · 2 University of Cambridge · 3 Australian National University · 4 The University of Melbourne

open access

Abstract

The Russian bond default in August 1998 and the long-term capital management (LTCM) recapitalization announcement in the following month represent an unusual period of volatility in international bond markets with bond spreads increasing dramatically across the globe. Using a latent factor model and a new data set spanning bond markets across Asia, Europe and the Americas, we quantify the contribution of contagion to the spread of these two crises. The maximum amount of contagion experienced by any of the countries investigated is about 17% of total volatility in bond spreads, with the main effects due to the Russian crisis. The results also show that both emerging and developed markets experienced contagion during the period.

DOI
10.1016/j.jfs.2005.01.001
Volume
2
Issue
1
Pages
1-27
Language
en
Sources
crossref openalex bibtex:phds-export.bib

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