Exploring the Contagion Effect from Developed to Emerging CEE Financial Markets

The paper aims to analyze the contagion effect coming from developed stock markets of US and Germany emerging CEE Romania, Czech Republic, Hungary, Poland using daily data for period April 2005–April 2021. also captures level integration these by analyzing volatility spillover phenomenon. quantification consisted an empirical analysis based on DCC-GARCH (Dynamic Conditional Correlation) model. Through this multivariate model, time-varying conditional correlations were analyzed, both in periods normal economic development times instability, when there was a significant increase correlation coefficients between market indices. Furthermore, connectedness has been analyzed index Diebold Yilmaz. results surprised high Central Eastern Europe, with intensity transmission increasing significantly during crisis. All indices show which they transmit net receive volatility, indicating bidirectional Mostly, BET, PX, WIG are transmitters volatilities, whereas BUX is recipient, except COVID-19 crisis, it transmitted other three Finally, Markov switching-regime VAR approach two regimes, we explored pandemic. proved shift around outbreak health after regime dominates markets. effects increased first stage