Contagion and Causality: An Empirical Investigation of Four Asian Crisis Episodes

Our study extends on conventional measures of contagion by directly investigating changes in the existence and the directions of causality. In particular, we apply a granger-causality methodology on sovereign bond spreads as a measure of perceived country risk. For the asian crisis, we find evidence for new and changed causality patterns on a regional level. With the arrival of the russian crisis, causality patterns were changing not only on a regional but also on a global level.