Rethinking financial contagion: Information transmission mechanism during the COVID-19 pandemic

Larisa Yarovaya*, Janusz Brzeszczyński, John W. Goodell, Brian Lucey, Chi Keung Marco Lau

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

Rapidly growing numbers of empirical papers assessing the financial effects of COVID-19 pandemic triggered an urgent need for a study summarising the existing knowledge of contagion phenomenon. This paper provides a review of conceptual approaches to studying financial contagion at four levels of information transmission: (i) Catalyst of contagion; (ii) Media attention; (iii) Spillover effect at financial markets; (iv) Macroeconomic fundamentals. We discuss the unique characteristics of COVID-19 crisis and demonstrate how this shock differs from previous crises and to what extent the COVID-19 pandemic can be considered a ‘black swan’ event. We also review the main concepts, definitions and methodologies that are frequently, but inconsistently, used in contagion literature to unveil the existing problems and ambiguities in this popular area of research. This paper will help researchers to conduct coherent and methodologically rigorous research on the impact of COVID-19 on financial markets during the pandemic and its aftermath.
Original languageEnglish
Article number101589
Number of pages23
JournalJournal of International Financial Markets, Institutions and Money
Volume79
Early online date25 May 2022
DOIs
Publication statusPublished - 1 Jul 2022

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