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Title: A time-frequency analysis of financial market contagion in Europe Authors:  Luis Aguiar-Conraria - Universidade do Minho (Portugal) [presenting]
Maria Joana Soares - University of Minho (Portugal)
Mustapha Ojo - Universidade do Minho (Portugal)
Abstract: The increasing interconnectedness of the global economy and the rapid integration of global financial markets promote global economic growth, increase sheer volume and velocity of international financial transactions, and improve capital flow to many countries. On the flip side, it poses challenges to global economic and financial architectures. For instance, global financial markets have witnessed many financial and currency crises in the last four decades. One central feature of these crises is the snowballing effect from one market or geographical location to another. This largely undesired domino effect of financial market crises is generally termed contagion; there appears to be no consensus on its definition or measurements. Some prominent definitions, among several others, include a significant increase in the conditional probability of a crisis in one country relative to another country; focuses on the volatility spillover of asset prices from the crisis country to other countries; occurs when fundamentals cannot explain cross-country co-movements of asset prices. Financial contagion in the debt markets is investigated during various crisis-ridden periods in Eurozone using a wavelet approach and proposes a definition compatible with the time-frequency framework of wavelet analysis.