There are several branches of classifications that explain the mechanism of financial contagion, which are spillover effects and financial crisis that are caused by the influence of the four agents' behavior. One of the biggest worldwide crises was the stock market crash on Wall Street in October This priority was especially important during the period, when global economies were under challenge from the U. Dummy variable statistics Search for additional papers on this topic. Choosing the crisis period introduces sample selection bias, and it has to be assumed that crisis periods are sufficiently long to allow correlations to be reliably estimated. We find that correlations in currency and sovereign spreads increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. Taimur Baig ; Ilan Goldfajn. A better understanding of financial contagion between financial intermediaries , including banking , rating agencies and hedge funds will be conducive to making financial reform in both U.
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Financial Market Contagion in the Asian Crisis
If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form. Financial Market Contagion in the Asian Crisis. The history of the —08 crisis traces back to the bursting of the housing bubble in the United States, and the increase in mortgage defaults. Citation Statistics Citations 0 5 10 15 '98 '02 '07 '12 ' It can make investors adjust their behaviors after a financial transaction occurs internationally or an initial crisis occurs. This can cause a market failure problem, which could potentially cause a financial crisis. This stream of research date back to early studies of crowd psychology of Mackay  and classical early models of disease diffusion were applied to financial markets by Shiller The development of sophisticated financial products, such as credit default swaps and collateralized debt obligations , has complicated the financial regulation. As Pesaran and Pick observe, however, financial contagion is a difficult system to estimate econometrically.
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IMF Working Papers
Financial regulation and Wall Street reform. Taimur Baig Ilan Goldfajn. As Pesaran and Pick observe, however, financial contagion is a difficult system to estimate econometrically. This paper has highly influenced 22 other papers. If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. A reduction of equity prices can result in a loss of money for investors. Some examples that can cause contagion are increased risk aversion, lack of confidence, and financial fears. Latin American Economic Crises. Yet, there were episodes of international financial crisis that occurred before the introduction of the term contagion. You can help correct errors and omissions.
Description:The former provide a general equilibrium model to explain a small liquidity preference shock in one region can spread by contagion throughout the economy and the possibility of contagion depends strongly on the completeness of the structure of interregional claims. Retrieved 17 December This paper has citations. This move caused major financial problems across the world, especially for those countries that rely heavily on international borrowing. Brookings Papers on Economic Activity. Therefore, understanding the reasons and mechanisms of international financial contagion can help policy makers improve the global financial regulation system and thus make it more resistant to shocks and contagions.
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