A model of international financial crises

Taisei Kaizoji ()

Physica A: Statistical Mechanics and its Applications, 2001, vol. 299, issue 1, 279-293

Abstract: This paper proposes a model of international financial crises that is based on the statistical mechanics. In our model the international stock market is composed of two groups of traders mutually influencing each other with respect to their decision behavior, and financial contagion between markets occurs as a result of attempts by traders in the domestic market to imitate the behavior of traders who participate into exchange in a foreign market. This provides a channel through which a crisis in one market such as contemporaneous stock market crashes can be transmitted to other markets. We show that the model can explain the stylized facts characterizing periods of recent international financial crises.

Keywords: Ising spin model; The international financial crises; Contagion; The stylized facts (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:299:y:2001:i:1:p:279-293

DOI: 10.1016/S0378-4371(01)00307-7

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