Flavin, Thomas J.Lagoa-Varela, Dolores2016-03-282016-03-282016http://hdl.handle.net/2183/16436[Abstract] We test for contagion between banking stocks – global and domestic – and the domestic nonfinancial sector for eleven Eurozone countries. Using a Markov-switching Factor augmented VAR (MS-FAVAR) model, we assess changes to the transmission mechanism of shocks as we move from ‘normal’ market conditions to a high-volatility, ‘crisis’ regime. Results confirm the role of contagion in propagating shocks between the global and domestic banking sectors but show that the non-financial sector suffered little contagion. In general, the nonfinancial sectors appear to ‘de-couple’ from the global and domestic banking sectors.engContagionShock transmissionFinancial market crisesworking paperopen access