What Drives Contagion: Trade Neighborhood, or Financial Links?

By Rodrigo O. Valdes, Leonardo Hernández

March 1, 2001

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Rodrigo O. Valdes, and Leonardo Hernández. What Drives Contagion: Trade Neighborhood, or Financial Links?, (USA: International Monetary Fund, 2001) accessed September 18, 2024

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 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.

Subject: Competition, Currency markets, Financial institutions, Financial markets, Financial services, Sovereign bonds, Stock markets, Yield curve

Keywords: A. sovereign bond, Bond indicator, Bond Spreads, Capital Flows, Competition, Contagion, Crisis Transmission, Currency markets, Financial market, Fund manager, Global, Sovereign bond spread, Sovereign bonds, Stock Market, Stock markets, Trade competition, Trade link, WP, Yield curve

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/029
Stock No:

WPIEA0292001
ISBN:

9781451844801
ISSN:

1018-5941

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