Trade and Financial Contagion in Currency Crises

Ranil Salgado, Luca Ricci and Francesco Caramazza

No 2000/055, IMF Working Papers from International Monetary Fund

Abstract: This paper investigates empirically the relevance of external, domestic, and financial weaknesses as well as trade and financial linkages in inducing financial crises for a sample of 61 emerging market and industrial countries. A panel probit estimation finds these economic indicators to be significant for emerging market countries during the Mexican, Asian, and Russian crises. In particular, the indicators of vulnerability to international financial spillover (common creditor) and of financial fragility (reserve adequacy) are highly significant and appear to explain the apparent regional concentration of these crises. Exchange rate regimes and capital controls, however, do not seem to matter.

Keywords: WP; crisis; crisis country; emerging market; market; ERM crisis; Currency crises; emerging markets; contagion; trade and financial spillovers; financial market; crisis emerging market economies; emerging market crisis; balance of payments crisis; exchange rate appreciation; Emerging and frontier financial markets; Exchange rate arrangements; Currency markets; Global (search for similar items in EconPapers)
Pages: 46
Date: 2000-03-01
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Citations: View citations in EconPapers (130)

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