What Drives Contagion: Trade Neighborhood, or Financial Links?

Author/Editor:

Rodrigo O. Valdes ; Leonardo Hernández

Publication Date:

March 1, 2001

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 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.

Series:

Working Paper No. 2001/029

Subject:

Competition Currency markets Financial institutions Financial markets Financial services Sovereign bonds Stock markets Yield curve

English

Publication Date:

March 1, 2001

ISBN/ISSN:

9781451844801/1018-5941

Stock No:

WPIEA0292001

Pages:

22

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