Trade and Financial Contagion in Currency Crises

Author/Editor:

Ranil M Salgado ; Luca A Ricci ; Francesco Caramazza

Publication Date:

March 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2000/055

Subject:

Currency crises Currency markets Emerging and frontier financial markets Exchange rate arrangements Financial crises Financial markets Foreign exchange

English

Publication Date:

March 1, 2000

ISBN/ISSN:

9781451847611/1018-5941

Stock No:

WPIEA0552000

Pages:

46

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