1. Regional or Local Damage? Contagion Effects of Greek Debt Crisis Revisited

The term contagion has become one of the central topics in the financial literature after devastating effects of Asian Crisis. In general terms, contagion is the increase in the relationships between the markets after a shock that occur in a country or in a group of countries. The consecutive crises that the world is facing in recent years caused an increase in the number of studies that try to find the answer if the crises change the volatility spillovers between the countries and cause contagion effects or not. When the contagion is considered as the initiation of volatility spillover from the financial markets of crisis-originating country to the financial markets of other countries, capital markets of emerging markets are expected to become very fragile due to the foreign capital flows. For this reason, the effects of crises are felt more profoundly in these markets, and these markets are exposed to contagion effects more than developed countries. The determination of contagion effects is crucial especially for international investors that aim to decrease portfolio risk by international diversification. Also it will provide valuable information to policy makers that can be used in decision processes. There are various econometric methodologies that detect the contagion effects and one of them is frequency domain causality approach. In this context, in the study, contagion effects of Greek debt crisis on 34 European stock markets are analyzed by traditional and frequency domain causality approach. According to the results, there are contagion effects from Greek stock market to Czech Republic, Spain, Estonia, Hungary, Ireland, Iceland, Lithuania, Luxembourg, and Portugal stock markets.