Analysis Of Financial Crisis Contagion Of Developed Markets To Emerging Markets Based On VAR Model

Since the beginning of the 21 st century,the process of economic globalization has been further accelerated,financial markets have become more complicated,and the susceptibility of the financial crisis and the linkage between different markets are becoming more obvious.At the same time,the emerging market countries led by China have gradually expanded their opening-up,which has injected new impetus into the development of the global economy,but it has also increased the possibility of the emerging economy market infecting the financial crisis while pushing forward the economy.In particular,the successive subprime mortgage crisis and the European debt crisis have greatly delayed the development of the global economy.The spread of financial crisis has been studied by scholars at home and abroad.And,the financial market contagion mechanism is more favored by scholars because of the sensitivity of financial asset prices to economic shocks.This article mainly studies the crisis contagion effect between developed and emerging market stocks under the background of financial crisis,and uses BRICS as a representative of emerging markets to supplement the evidence.First,the GARCH(1,1)model is fitted to eliminate the ARCH effect of the stock market return time series.On this basis,the method of VAR system is used to examine the contagion effect of the financial crisis by analyzing the causal relationship between the volatility of various markets before and after the crisis,and analyzing the changes in the response of infected markets to developed markets.Granger causality test shows that there is a two-way causality between the stock market volatility of developed markets and emerging markets in both crisis and stable periods,indicating that since the new century,the relationship between the two types of markets has become stronger and stronger,and there is a crisis contagion effect between them;during the steady period,the economic relationship between developed markets and BRICS countries is weak,but during the crisis,the two types of markets are dominated by two-way causality,indicating that the financial crisis has strengthened the links between different markets.The contagion effect is magnified;at the same time,the correlation between China and the BRICS countries is not strong in the steady period,but during the crisis period,China’s stock market has established a one-way causal relationship with other countries,indicating that China’s exchanges with other countries have increased,and there is also a crisis within the BRICS market.On this basis,by studying the length and amplitude of the impulse response,this paper more specifically analyzes the contagion intensity and duration of developed markets to emerging markets,developed markets to BRICs countries,and China to BRICs countries.These fully prove the contagion effect of financial crisis.