Crisis Transmission: Evidence from the Debt, Tequila, and Asian Flu Crises
The increasing globalization of the economy has put the issue of the international transmission of crises in the front line. Although the word contagion is a rather new concept in international finance, it is the focus of a large number of policy-oriented seminars and debates. The clustering of crises by both region and time are at the heart of this discussion. There are several important questions that need to be answered. In this chapter we focus on a subset of them: (i) What are the propagation channels of international crises across countries (other than common shocks)? (ii) Was the debt crisis contagious? And (iii) are there useful policy instruments to shield countries from contagion? In particular, do capital controls, exchange rate flexibility and the external debt-maturity structure affect contagion? We seek to answer these questions using evidence from three key events: the 1982 debt crisis; the 1994 Mexican devaluation; and the 1997 Asian crisis.
KeywordsCurrent Account Real Exchange Rate Credit Rating Debt Crisis Current Account Deficit
Unable to display preview. Download preview PDF.
- Berg, Andrew, and Catherine Pattillo (1998). “Are Currency Crises Predictable? A Test.” IMF Working Paper No. 98 /154.Google Scholar
- De Gregorio, José, Sebastian Edwards, and Rodrigo O. Valdés (2000). “Capital Controls: Do They Work?” Forthcoming in Journal of Development Economics.Google Scholar
- De Gregorio, José, Barry Eichengreen, Takatoshi Ito, and Charles Wyplosz (1999). An Independent and Accountable IMF. Geneva: International Center for Monetary and Banking Studies and CEPR.Google Scholar
- Eichengreen, Barry, Andrew Rose, and Charles Wyplosz (1997). “Contagious Currency Crises.” NBER Working Paper No. 5681.Google Scholar
- Gourinchas, Pierre Olivier, Oscar Landerretche, and Rodrigo O. Valdés (1998). “Credit Booms: The Stylized Facts.” Central Bank of Chile, mimeo.Google Scholar
- Kaminsky, Graciela, and Carmen Reinhart (1998). “On Crises, Contagion, and Confusion.” University of Maryland, mimeo.Google Scholar
- Kaminsky, Graciela, Saul Lizondo, and Carmen Reinhart (1998). “Leading Indicators of Currency Crises.” IMF Staff Papers, March.Google Scholar
- Rigobón, Roberto (1999). “On the Measurement of the International Propagation of Shocks.” MIT, mimeo.Google Scholar
- Sachs, Jeffrey, Aaron Tomell, and Andrés Velasco (1996). “Financial Crises in Emerging Markets: The Lessons from 1995.” Brookings Papers on Economic Activity.Google Scholar