Financial contagion is modeled as an equilibrium phenomenon. Because liquidity preference shocks are imperfectly correlated across regions, banks hold interregional claims on other banks to provide insurance against liquidity preference shocks. When there is no aggregate uncertainty, the...

In this paper, the direction-of-dependence concept was introduced for analyzing asymmetric properties of stock markets. The simulation results indicated that US major stock markets had the leading of the world stock market before 2008. The situation changed after 2008 where the leading role was...

Local correlation is used to examine financial contagion. We share the view of previous research that there is contagion from the U.S. spot equity market to that of Germany and Britain. In addition, we provide evidence to suggest contagion from the U.S. spot equity market to that of Japan and...