Does Financial Contagion Really Happen?

• Rido Tanago, Munawar Ismail, Ghozali Maski, Devanto Shasta Pratomo Faculty of Economics and Business, Brawijaya University, Indonesia

Abstract

The purpose of this paper is to answer whether contagion happens during financial crises. This paper surveys the various definitions, measuring, and findings from financial contagion literature. We find that contagion or spillover happened slightly before and shortly during the global financial crisis even there is capital flow from the United States to some EMEs. In conclusion, there is still disagreement about the definition of contagion, whether it is a spillover or contagion, whether there is a negative or positive spillover, also which definition of contagion to be used; wide or narrow definition.