Cover IMF Working Papers
Discriminating Contagion: An Alternative Explanation of Contagious Currency Crises in Emerging Markets
Author: Pavan Ahluwalia
Series:
IMF Working Papers
Volume/Issue:
Volume 2000: Issue 014
Language:
English
Publication Date:
01 Feb 2000
DOI:
https://doi.org/10.5089/9781451843118.001
ISBN:
9781451843118
ISSN:
1018-5941
Pages:
38
Keywords:
WP; exchange rate; contagion indicator variable; current account; income effect; Contagion; currency crisis; balance-of-payments; speculative; macroeconomic variable; contagion variable; discriminating contagion effect; variable CT; Currency crises; Real exchange rates; Emerging and frontier financial markets; Currencies; East Asia; Africa
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper shows that a country’s vulnerability to contagious crises depends on the visible similarities between that country and other countries that are experiencing crises. A country is vulnerable to shifts in investor sentiment if it exhibits weaknesses in the same economic variables as other countries affected by a contagious crisis (particularly the country that started the contagious wave), or if it is located in the same region. The paper uses a sample of 19 emerging markets, and data from the Mexican, Asian, and Russian crises to provide evidence of this discriminating contagion, after controlling for alternative channels of contagion such as trade spillovers and financial linkages.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund