Chapter

International Financial Contagion

pp 43-66

Measuring Contagion: Conceptual and Empirical Issues

  • Kristin ForbesAffiliated withMassachusetts Institute of Technology and NBER
  • , Roberto RigobonAffiliated withMassachusetts Institute of Technology and NBER

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Abstract

The 1990’s has been punctuated by a series of severe financial and currency crises: the Exchange Rate Mechanism (ERM) attacks of 1992; the Mexican peso collapse of 1994; the East Asian crisis of 1997; the Russian collapse of 1998; and the Brazilian devaluation of 1999. One striking characteristic of several of these crises was how an initial country-specific shock was rapidly transmitted to markets of very different sizes and structures around the globe. This has prompted a surge of interest in “contagion”.