[PDF] On Currency Crises And Contagion eBook

Author : Sebastian Edwards
Publisher : University of Chicago Press
Page : 782 pages
File Size : 34,61 MB
Release : 2002-11-15
Category : Business & Economics
ISBN : 9780226184944

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Economists and policymakers are still trying to understand the lessons recent financial crises in Asia and other emerging market countries hold for the future of the global financial system. In this timely and important volume, distinguished academics, officials in multilateral organizations, and public and private sector economists explore the causes of and effective policy responses to international currency crises. Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds). Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.

Author : Masahiro Kawai
Publisher : World Bank Publications
Page : 60 pages
File Size : 11,94 MB
Release : 2001
Category : Banks and banking
ISBN :

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Currency and banking crises such as those originating in Mexico (1994), Thailand (1997), and the Russian Federation (1998) tend to be associated and often take place together across countries. The East Asian experience was a fruitful laboratory for examining key questions. For example: How did contagion occur so extensively, and why was it so devastating? Did policy responses to crises and contagion minimize their impact on the real economy? What type of international financial architecture is needed to prevent and manage crises and contagion?

Author : Kenshi Taketa
Publisher :
Page : 42 pages
File Size : 42,89 MB
Release : 2004
Category : Currency crises
ISBN :

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This paper shows that a currency crisis can spread from one country to another even when these countries are unrelated in terms of economic fundamentals. The propagation mechanism lies in each speculator's private information about his/her own type and learning behavior about other speculators' types. Since the payoff of each speculator depends on the behavior of other speculators as determined bytheir types, each speculator's behavior depends on his/her belief about other speculators' types. If a crisis in one country reveals the speculator types, it leads to a revision of each speculator's beliefs about other speculators' types and therefore a change in his/her optimal behavior, which in turn can cause a crisis even in another unrelated country. This paper also shows that the better the economic fundamentals in the country where the crisis originates, the more contagious the original crisis can be.

Author : Ms.Nada Choueiri
Publisher : International Monetary Fund
Page : 27 pages
File Size : 47,58 MB
Release : 1999-03-01
Category : Business & Economics
ISBN : 1451844786

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This paper proposes a model of contagious currency crises: crises transmit across countries by raising the risk premium on government bonds. Three types of equilibria can occur: a “no-collapse” equilibrium (crises never transmit from abroad); a “collapse” equilibrium (crises are inevitably contagious); or a “fundamentals” equilibrium (crises are contagious if domestic fundamentals are weak). A calibration exercise finds that the 1995 turmoil in Argentina coexisted with a combination of risk-averse investors and weak credibility in the currency board arrangement. This turmoil could only be attributed to a Tequila effect from the Mexican crisis alone if investors were excessively risk-averse.

Author : Valerie Cerra
Publisher : International Monetary Fund
Page : 32 pages
File Size : 49,87 MB
Release : 2000-03
Category : Business & Economics
ISBN :

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This decade has witnessed currency crises in many parts of the world. The decade began with the ERM breakdown in 1992, followed by the Mexican crisis in 1994, which spread to Latin America. Yet, the magnitude of the 1997 crisis in South East Asia, which engulfed countries like Thailand, Indonesia, Malaysia, South Korea and the Philippines was unexpected by most observers. Indeed, Asia had been praised as a miracle for its outstanding growth performance since the late 1980s and early 1990s; some of the economies involved in the crisis had earned the title of Asian Tiger. These Asian economies were consistently praised for their openness, and the economies prospered as liberalization drives led to large inflows of capital.

Author : Mark Kruger
Publisher :
Page : 28 pages
File Size : 22,98 MB
Release : 1998
Category : Africa
ISBN : 9780662270195

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This paper examines the determinants of currency crises in Latin America, Asia, and Africa. It asks two basic questions: are currency crises linked to economic fundamentals, and is there evidence of a contagion effect after controlling for the potential effects of economic fundamentals. The examination uses pooled annual data for 19 developing countries spanning the period 1977-93. Economic variables considered include the growth rate of domestic credit, real exchange rate misalignment, the relation of the M2 monetary aggregate to international reserves, and fiscal or current account deficits.

Author : Roberto Chang
Publisher : World Bank Publications
Page : 40 pages
File Size : 37,57 MB
Release : 2000
Category : Bankruptcy and Resolution of Financial Distress
ISBN :

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What can the international community do to prevent financial contagion?

Author : Reuven Glick
Publisher :
Page : 44 pages
File Size : 32,70 MB
Release : 1998
Category : Devaluation of currency
ISBN :

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Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond any macroeconomic phenomena. We provide empirical support for this hypothesis. Using data for five different currency crises (in 1971, 1973, 1992, 1994, and 1997) we show that currency crises affect clusters of countries tied together by international trade. By way of contrast, macroeconomic and financial influences are not closely associated with the cross-country incidence of speculative attacks. We also show that trade linkages help explain cross-country correlations in exchange market pressure during crisis episodes, even after controlling for macroeconomic factors.