On Currency Crises and Contagion

Marcel Fratzscher

No WP00-9, Working Paper Series from Peterson Institute for International Economics

Abstract: This paper analyzes the role of contagion in the currency crises in emerging markets during the 1990s. It employs a non-linear Markov-switching model to conduct a systematic comparison and evaluation of three distinct causes of currency crises: contagion, weak economic fundamentals, and sunspots, i.e. unobservable shifts in agents' beliefs. Testing this model empirically through Markov-switching and panel data models reveals that contagion--a high degree of real integration and financial interdependence among countries--is a core explanation for recent emerging market crises. The model has a remarkably good predictive power for the 1997-98 Asian crisis. The findings suggest that in particular the degree of financial interdependence and also real integration among emerging markets are crucial not only in explaining past crises but also in predicting the transmission of future financial crises.

Keywords: currency crises; contagion (search for similar items in EconPapers)
Date: 2000-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://www.piie.com/publications/working-papers/currency-crises-and-contagion (text/html)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: On currency crises and contagion (2003)
Working Paper: On currency crises and contagion (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iie:wpaper:wp00-9

Access Statistics for this paper

More papers in Working Paper Series from Peterson Institute for International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Peterson Institute webmaster ().