Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria
September 1, 1998
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Summary
Several concepts of contagion are distinguished. It is argued that only models that admit of multiple equilibria are capable of producing true contagion. A simple balance of payments model is presented to illustrate that phenomenon, and some back-of-the-envelope calculations assess its relevance to the coincidence of emerging market crises in 1994–95 and in 1997.
Subject: Currencies, Emerging and frontier financial markets, Exchange rates, External debt, Financial markets, Foreign exchange, International trade, Money, Trade balance
Keywords: contagion, Currencies, devaluation expectation, devaluation risk, dollar exchange rate peg, East Asia, Emerging and frontier financial markets, emerging-market country, exchange rate, Exchange rates, multiple equilibria, Southeast Asia, spillovers, Trade balance, U.S. dollar, WP
Pages:
32
Volume:
1998
DOI:
Issue:
142
Series:
Working Paper No. 1998/142
Stock No:
WPIEA1421998
ISBN:
9781451856224
ISSN:
1018-5941
