A Model Of Contagious Currency Crises With Application To Argentina
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A Model of Contagious Currency Crises with Application to Argentina
Author: Ms.Nada Choueiri
language: en
Publisher: International Monetary Fund
Release Date: 1999-03-01
This paper proposes a model of contagious currency crises: crises transmit across countries by raising the risk premium on government bonds. Three types of equilibria can occur: a “no-collapse” equilibrium (crises never transmit from abroad); a “collapse” equilibrium (crises are inevitably contagious); or a “fundamentals” equilibrium (crises are contagious if domestic fundamentals are weak). A calibration exercise finds that the 1995 turmoil in Argentina coexisted with a combination of risk-averse investors and weak credibility in the currency board arrangement. This turmoil could only be attributed to a Tequila effect from the Mexican crisis alone if investors were excessively risk-averse.
Contagion in Financial Markets
Author: Friedrich L. Sell
language: en
Publisher: Edward Elgar Publishing
Release Date: 2001-01-01
This book aims to integrate the notions of contagion in epidemiology and contagion in financial market crises to discover why emerging markets are so susceptible to financial crises. The author first provides a brief introduction of the contagious spill-over of recent financial market crises and models the pattern of these crises. He finds that the contagion between crises in emerging markets, such as that of the crises in Russia and Brazil in 1998-1999, is explicable, despite the fact that at first sight they appear to have little in common. Finally, Friedrich Sell integrates these findings to outline a proposal for a 'new international financial architecture'.
Has the Nature of Crises Changed? A Quarter Century of Currency Crises in Argentina
Author: Ms.Nada Choueiri
language: en
Publisher: International Monetary Fund
Release Date: 1999-11-01
The recent turmoil in currency markets in Asia, Europe, and Latin America has given a new impetus to the literature on currency crises. The literature originally linked currency crises to deteriorating economic fundamentals, but has more recently focused on self-fulfilling expectations and contagion. To assess the changing roles of domestic and external market fundamentals and contagion, this paper examines seven major currency crises in Argentina. It finds that while crises in the 1970s and 1980s were driven mainly by monetary and fiscal policies at home and abroad, contagion played an important role in the 1990s.