What Drives Contagion: Trade Neighborhood, or Financial Links?

Rodrigo Valdés and Leonardo Hernández

No 2001/029, IMF Working Papers from International Monetary Fund

Abstract: This paper presents evidence on the relative importance of alternative contagion channels during the Thai, Russian, and Brazilian crises. Results show that when crises are measured by changes in sovereign bond spreads, financial competition seems to explain almost all contagion episodes. However, when crises are measured by stock market returns, trade links and neighborhood effects appear to be relevant contagion channels during the Thai and Brazilian crises, while financial competition remains the only relevant channel in the case of the Russian crisis.

Keywords: WP; financial market; trade competition; Contagion; Bond Spreads; Stock Market; Capital Flows; Crisis Transmission; A. sovereign bond; sovereign bond spread; bond indicator; trade link; fund manager; Competition; Stock markets; Yield curve; Currency markets; Sovereign bonds; Global (search for similar items in EconPapers)
Pages: 22
Date: 2001-03-01
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Citations: View citations in EconPapers (59)

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Journal Article: What drives contagion: Trade, neighborhood, or financial links? (2001)
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