Regional Volatility Spillovers and Political Instability: A GARCH-DCC with Markov Switching Approach
Academy of Economics and Finance Journal
Market linkages are investigated by exploring the possibility of financial contagion from Brazil to five Latin American countries following the presidential election of Dilma Rousseff in 2014. A GARCH-DCC framework is employed to estimate the variance-covariance transmission mechanism. By means of both the Kolmogorov-Smirnov test and a Markov Switching Dynamic Regression (MSDR), an increase in conditional correlations between Brazil and five Latin American countries is found, suggesting a shift in the long run relationship and evidence of financial contagion.
volatility spillover, GARCH-DCC, Markov Switching, financial contagion
Tarwater, John, "Regional Volatility Spillovers and Political Instability: A GARCH-DCC with Markov Switching Approach" (2020). Business Administration Faculty Publications. 189.