Vanishing Contagion?
IMF Policy Discussion Papers, January 1, 2006
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Bibliographic details
- Authors: Paolo Mauro, Tatiana Didier, Sergio L. Schmukler
- Published: January 1, 2006
- Series: IMF Policy Discussion Papers
- DOI: https://doi.org/10.5089/9781451946062.003
Summary
- While a number of emerging market crises were characterized by widespread contagion during the 1990s, more recent crises (notably, in Argentina) have been mostly contained within national borders.
- Some observers have wondered whether contagion might have become a feature of the past, with markets better discriminating between countries with good and bad fundamentals.
- The paper argues that a prudent working assumption is that contagion has not vanished permanently.
- Available data do not seem to point to a disappearance of the main channels that contribute to transmitting crises across countries.
- Anticipation of the Argentine crisis by international investors may help explain the recent absence of contagion.
Findings and Analysis
- Contagion was widespread in many emerging market crises in the 1990s.
- Recent crises (example highlighted: Argentina) have been mostly contained within national borders.
- Empirical evidence reviewed in the paper does not support a permanent disappearance of contagion mechanisms.
- Investor anticipation and market discrimination are proposed as partial explanations for the apparent attenuation of contagion in recent episodes.
Subjects and Keywords
- Subject: Emerging and frontier financial markets, Financial crises, Financial institutions, Financial markets, Hedge funds, Mutual funds, Stock markets
- Keywords: crises, crisis, crisis economy, crisis month, East Asia, Eastern Europe, Emerging and frontier financial markets, emerging market country, ERM crisis, Hedge funds, international integration, international transmission of shocks, investor, market price, mutual fund, mutual fund holding, Mutual funds, net, PDP, Stock markets
IMF Policy Discussion Paper — Vanishing Contagion? (Paolo Mauro, Tatiana Didier, Sergio L. Schmukler), Policy Discussion Paper No. 2006/001, January 1, 2006.