The shift-contagion effect of global financial crisis and the European debt crisis on OECD Countries

This article investigates shift-contagion as defined by Forbes and Rigobon (2002) in 16 OECD member economies during most recent financial crisis i.e. global financial crisis (2008 -2009) and European sovereign debt crisis (2009-2012), using multivariate asymmetric dynamic conditional correlation model developed by Cappiello et al. (2006). The empirical analyses provide substantial evidence of shifts in the dynamic correlations and hence confirm shiftcontagion during the global financial crisis that originated from U.S. However, there is no evidence in support of shift-contagion during the European sovereign debt crisis which originated from events in Greece. The results provide important implications for investors and policy makers.