Discussion Paper Details

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Title: Did Globalization Kill Contagion?

Author(s): Olivier Accominotti, Marie Brière, Aurore Burietz, Kim Oosterlinck and Ariane Szafarz

Publication Date: February 2020

Keyword(s): contagion, economic integration, Financial history, Globalization, market interdependence and Stock market

Programme Area(s): Economic History

Abstract: Does financial globalization lead to contagion? We scrutinize linkages between international stock markets in a long historical perspective (1880-2014). Our results highlight that without globalization, contagion cannot exist. However, if cross-market correlations are very high, globalization kills contagion. We show that financial contagion was absent from stock markets in both the period of deglobalization of 1918-1971 and the era of "extreme" globalization of 1972-2014 but was present in the period of "moderate" globalization of 1880-1914. Our results suggest that contagion could become a significant problem if financial markets return to a more moderate level of globalization.

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Bibliographic Reference

Accominotti, O, Brière, M, Burietz, A, Oosterlinck, K and Szafarz, A. 2020. 'Did Globalization Kill Contagion?'. London, Centre for Economic Policy Research.