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Title: The effects of financial contagion, bubbles and monetary policy on the stock markets of the Middle East and North Africa region
Author: Abou Wafia , Hashem
Awarding Body: University of Essex
Current Institution: University of Essex
Date of Award: 2013
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This thesis investigates the impact of the US Subprime Crisis on the stock markets of the MENA region to derive the appropriate policy response that can mitigate the adverse effects of such events in the future. The objective of the first chapter is to determine whether the shock transmission occurred due to interdependence, or shift contagion. Two correlation based methods are employed that attempt to control for the heteroskedasticity introduced into the data due to the crisis event. The first method adjusts the correlation measure to directly correct for the heteroskedasticity bias. While the second method uses the Dynamic Conditional Correlation GARCH model which models the heteroskedasticity and traces out the conditional correlation series. The results obtained support the notion of shift contagion which implies that direct intervention in the markets could have lessened the adverse effects of the shock. The second chapter sets out to determine whether or not stock prices in these markets were inflated prior to the crisis. Specifically it tests for the presence of periodically collapsing speculative bubbles using a Markov switching ADF test and the Generalized Sup ADF test. Both methods enable the date stamping of bubble emergence and collapse. The results do not support the presence of a bubble prior to the Subprime crisis and thus confirm the conclusion of the first chapter that the shock was transmitted through shift contagion. Chapter three examines the interdependence between monetary policy, real exchange rates and stock prices to determine if monetary instruments can be used to influence stock prices in these markets. A combination of long and short run restrictions are employed to identify the monetary policy shock within a structural V AR framework. The results are heterogeneous but generally show that markets that pursue a relatively more independent monetary policy have more influence on stock prices.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available