International financial contagion:the role of the uk

Yalama A.

Bogazici Journal, vol.26, no.2, 2012 (Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 26 Issue: 2
  • Publication Date: 2012
  • Journal Name: Bogazici Journal
  • Journal Indexes: Scopus, TR DİZİN (ULAKBİM)
  • Eskisehir Osmangazi University Affiliated: Yes


The purpose of this study is to consider the role of the United Kingdom in the effect of transferring the global credit crisis from the United States to Turkey. This study compares the results of the most commonly used contagion models, which are known as Forbes and Rigobon model and Dungey, Fry, Gonzalez-Hermosillo and Martin model. Moreover, this study presents evidence regarding the manner of transmission of the crisis. This study confirmed that there is a strong contagion effect from the United States to Turkey and the United Kingdom. The importance of the United Kingdom in transferring this shock is captured in the DFGM model more accurately than in the FR model. Finally, the global credit crisis is transferred to Turkey through financial linkages rather than trade linkages. The existence and direction of contagion create an opportunity for investors to use international hedging strategies and asset allocation. JEL Classification: F30, G15.