Discussion paper

DP14395 Did Globalization Kill Contagion?

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.


Accominotti, O, M BRIERE, A Burietz, K Oosterlinck and A Szafarz (2020), ‘DP14395 Did Globalization Kill Contagion?‘, CEPR Discussion Paper No. 14395. CEPR Press, Paris & London. https://cepr.org/publications/dp14395