文摘
We explore the systemic contagion between carry trade portfolios and stock markets. A CoVaR model is adapted to measure systemic contagion which is defined as the tail risk conditional on extreme distress in other markets in excess of the norms of ordinary volatility-risk spillover. The evidence exhibits bilateral systemic contagion between carry-trade markets and stock markets in the U.S., European and Asia-Pacific regions. The systemic contagions are particularly severe during financial distress, like dot-com bubble and U.S. credit crisis.