Contagion and trade: why are currency crises regional?

Reuven Glick and Andrew Rose

No 98-03, Pacific Basin Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond and macroeconomic phenomena. We provide empirical support for this hypothesis. Using data for five different currency crises (in 1971, 1973, 1992, 1994, and 1997) we show that currency crises affect clusters of countries tied together by international trade. By way of contrast, macroeconomic and financial influences are not closely associated with the cross-country incidence of speculative attacks. We also show that trade linkages help explain cross-country correlations in exchange market pressure during crisis episodes, even after controlling for macroeconomic factors.

Keywords: Foreign exchange rates; Financial crises; Asia; Mexico (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (110)

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Related works:
Journal Article: Contagion and trade: Why are currency crises regional? (1999)
Working Paper: Contagion and Trade: Why are Currency Crises Regional (1998)
Working Paper: Contagion and Trade: Why Are Currency Crises Regional? (1998)
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