Multiple Equilibria, Contagion, and the Emerging Market Crises

Paul Masson

No 1999/164, IMF Working Papers from International Monetary Fund

Abstract: The paper surveys the types of models producing multiple equilibria in financial markets. It argues that such models are consistent with observed phenomena, such as the greater volatility of financial asset prices than of macroeconomic fundamentals. Alternative explanations are compared with the stylized facts concerning capital flows, portfolio shifts, and exchange rate crises. Implications for crisis prediction and prevention are then discussed.

Keywords: WP; emerging market; crisis; asset; price; bank run; emerging market crisis; market; contagion; multiple equilibria; currency crisis; asset price movement; equilibrium asset price; financial asset; emerging-market country; crisis zone; Emerging and frontier financial markets; Asset prices; Capital flows; Liquidity; Asia and Pacific; Africa; Global; Central and Eastern Europe (search for similar items in EconPapers)
Pages: 25
Date: 1999-12-01
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Citations: View citations in EconPapers (73)

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Journal Article: Multiple equilibria, contagion, and the emerging market crises (1999)
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