Network analysis of exchange data: interdependence drives crisis contagion

DAVID MATESANZ; GUILLERMO J. ORTEGA

Quality & Quantity International Journal of Methodology

Springer

Lugar: Berlin; Año: 2014 vol. 48 p. 1835 - 1851

In this paper, we examine linear and nonlinear co-movements that appear in the real exchange rates of a group of 28 developed and developing countries. The matrix ofPearson correlation and Phase Synchronous coefficients have been used in order to construct a topology and hierarchy of countries by using the Minimum Spanning Tree (MST). In addition, theMST cost and global correlation coefficients have been calculated to observe  the co-movements? dynamics throughout the time sample. By comparing Pearson and Phase Synchronous information, a new methodology is emphasized; one that can uncovermeaningful information pertaining to the contagion economic issue and, more generally, the debate surrounding interdependence and/or contagion in financial time series. Our results suggest some evidence of contagion in the Asian currency crises; however, this contagion is driven by previous and stable interdependence.