Multiple Equilibria, Contagion, and the Emerging Market Crises
December 1, 1999
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Summary
The paper surveys the types of models producing multiple equilibria in financial markets. It argues that such models are consistent with observed phenomena, such as the greater volatility of financial asset prices than of macroeconomic fundamentals. Alternative explanations are compared with the stylized facts concerning capital flows, portfolio shifts, and exchange rate crises. Implications for crisis prediction and prevention are then discussed.
Subject: Asset and liability management, Asset prices, Balance of payments, Banking, Capital flows, Emerging and frontier financial markets, Financial crises, Financial markets, Liquidity, Prices
Keywords: Africa, Asia and Pacific, asset, asset price movement, Asset prices, bank run, Capital flows, Central and Eastern Europe, contagion, crisis, crisis zone, currency crisis, Emerging and frontier financial markets, emerging market, emerging market crisis, emerging-market country, equilibrium asset price, financial asset, Global, Liquidity, market, multiple equilibria, price, WP
Pages:
25
Volume:
1999
DOI:
Issue:
164
Series:
Working Paper No. 1999/164
Stock No:
WPIEA1641999
ISBN:
9781451857979
ISSN:
1018-5941
