Trade and Financial Contagion in Currency Crises

By Ranil M Salgado, Luca A Ricci, Francesco Caramazza

March 1, 2000

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Ranil M Salgado, Luca A Ricci, and Francesco Caramazza. Trade and Financial Contagion in Currency Crises, (USA: International Monetary Fund, 2000) accessed December 3, 2024

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 investigates empirically the relevance of external, domestic, and financial weaknesses as well as trade and financial linkages in inducing financial crises for a sample of 61 emerging market and industrial countries. A panel probit estimation finds these economic indicators to be significant for emerging market countries during the Mexican, Asian, and Russian crises. In particular, the indicators of vulnerability to international financial spillover (common creditor) and of financial fragility (reserve adequacy) are highly significant and appear to explain the apparent regional concentration of these crises. Exchange rate regimes and capital controls, however, do not seem to matter.

Subject: Currency crises, Currency markets, Emerging and frontier financial markets, Exchange rate arrangements, Financial crises, Financial markets, Foreign exchange

Keywords: Balance of payments crisis, Contagion, Crisis, Crisis country, Crisis emerging market economies, Currency crises, Currency markets, Emerging and frontier financial markets, Emerging market, Emerging market crisis, Emerging markets, ERM crisis, Exchange rate appreciation, Exchange rate arrangements, Financial market, Global, Market, Trade and financial spillovers, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/055
Stock No:

WPIEA0552000
ISBN:

9781451847611
ISSN:

1018-5941

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