On crises, contagion, and confusion

Reinhart, Carmen and Kaminsky, Graciela (1998): On crises, contagion, and confusion. Published in: Journal of International Economics , Vol. 51, No. 1 (June 2000): pp. 145-168.

Abstract

Since the Tequila crisis of 1994-95, the Asian flu of 1997, and the Russian virus of 1998, economists have been busy producing research on the subject of contagion. Yet, few studies have examined empirically through which channels the disturbances are transmitted if there are, indeed, fundamental reasons for the spillovers we observe. We attempt to fill this gap by analyzing how both trade links and the largely ignored financial sector links influence the pattern of fundamentals-based contagion. We examine the role of international bank lending, the potential for cross-market hedging, and bilateral and third-party trade in the propagation of crises.

• Item Type: MPRA Paper
• Language: English
• Keywords: trade financial contagion bank lending currency crisis devaluation
• Subjects: F - International Economics > F3 - International Finance; F - International Economics > F1 - Trade

References

Agenor, Pierre-Richard and Joshua Aizenman, (1997), “Contagion and Volatility with Imperfect Credit Markets,” mimeo.

Arias, Eduardo Fernandez, Ricardo Hausmann and Roberto Rigobon, (1998), “Contagion on Bond Markets: Preliminary Notes,” mimeo.

Baig, Taimur and Ilan Goldfajn, (1998), “Financial Market Contagion in the Asian Crisis,” forthcoming International Monetary Fund Working Paper.

Calvo, Guillermo, (1998), “Capital Market Contagion and Recession: An Explanation of the Russian Virus,” mimeo.

Calvo, Guillermo, and Enrique Mendoza, “Rational Herd Behavior and the Globalization of Securitites Markets,” mimeo.

Calvo, Sara and Carmen M. Reinhart, (1996), “Capital Flows to Latin America : Is There Evidence of Contagion Effects?” in Guillermo A. Calvo, Morris Goldstein, and Eduard Hochreitter,eds. Private Capital Flows to Emerging Markets, (Washington DC: Institute for International Economics.)

Cashin, Paul, Manmohan S. Kumar and C. John McDermott, (1995),” International Integration of Equity Markets and Contagion Effects,” International Monetary Fund WP,

Corsetti, Giancarlo, Paolo Pesenti, Nouriel Roubini, Cedric Tille, “Structural Links and Contagion Effects in the Asian Crisis: A Welfare Based Approach,” mimeo.

Doukas, John (1989), “Contagion Effect on Sovereign Interest Rate Spreads,” Economics Letters, 29, April, 237-241

Eichengreen, Barry and Ashoka Mody, (1997), “What Explains Changing Spreads On Emerging-Market Debt: Fundamentals or Market Sentiment,”

Eichengreen, Barry, Andrew Rose and Charles Wyplosz, (1996), “Contagious Currency Crises,” National Bureau of Economic Research Working Paper No. 5681.

Esquivel Gerardo, and Felipe Larrain, (1998), “Explaining Currency Crises,” Working Paper R98-07, Kennedy School of Government.

Forbes, Kristin, and Roberto Rigobon, (1998), “Contagion or Vulnerability?” WP, Sloan School of Management .

Frankel, Jeffrey, and Sergio L. Schmukler, (1996) “Country Fund discounts and the Mexican crisis of December 94: did Local Residents Turn Pessimistic Before International Investors?,” National Bureau of Economic Research Working Paper No. 5714.

Glick, Reuven, and Andrew Rose, (1998), “Contagion and Trade: Why Are Currency Crises Regional?”, mimeo.

International Monetary Fund, (1998), International Capital Markets: Developments, Prospects, and Key Policy Issues, (Washington DC: International Monetary Fund).

Kaminsky, Graciela L., (1998), “Currency and Banking Crises: The Early Warnings of Distress,” mimeo.

Kaminsky, Graciela L., and Carmen M. Reinhart, (1996) “The Twin Crises: The Causes of Banking and Balance of Payments Problems,” forthcoming in American Economic Review.

Kaminsky, Graciela L., Saul Lizondo, and Carmen M. Reinhart, (1998), “Leading Indicators of Currency Crises,” Staff Papers, International Monetary Fund, March.

Kaminsky, Graciela L., and Sergio Schmukler, “

Lin, Wen-Lin, “Interdependence between International Stock Returns: News or Contagion Effect?” WP, Dep of Econ, U Wisconsin

Lowell, Julia, C. Richard Neu, and Daochi Tong, (1998), “Financial Crises and Contagion in Emerging Market Countries,” Rand.

Perry, Guillermo, and Daniel Lederman, (1998), “Financial Vulnerability, Spillover Effects and Contagion:Lessons from the Asian crises for Latin America,” WP, The world Bank

Lee S. Redding, (1996), “Noise Traders and Herding Behavior,” International Monetary Fund Working Paper WP/96/104.

Roberto Rigobon, 1998a, “Informational Speculative Attacks: Good News is No News,” mimeo

Roberto Rigobon, 1998b, “On the Measurement of Contagion,” mimeo.

Schmukler, Sergio, and Jeffrey A. Frankel, “Crisis Contagion, and Country Funds,”mimeo.

Taylor, Lance, “Lax Public Sector, Destabilizing Private Sector: Origins of Capital Market Crisis,” Revista de La Universidad de Palermo, October 1998.

Valdes, Rodrigo O., (1997), “Emerging Markets Contagion: Evidence and Theory,” mimeo.

Wolf, Holger C., (1997), “Regional Contagion Effects in Emerging Markets,” Working Papers in International Economics, G-97-03, Princeton University.