Crisis Spillovers in Emerging Market Economies: Interlinkages, Vulnerabilities and Investor Behaviour
Bank of England Working Paper No. 212
40 Pages Posted: 4 Oct 2004
Date Written: February 2004
Many emerging market economy (EME) financial crises in the 1990s quickly spread to other countries. By contrast, spillovers from the Argentina crisis in 2001-02 appear to have been much more limited. Why do some crises spread widely and others do not? This paper stresses the joint importance of intra-EME linkages, related country-specific vulnerabilities and investor behaviour. This framework provides insights into some potential reasons behind the differing extent of spillovers in two case studies - Asia 1997-98 and Argentina 2001-02. It also highlights the need for further analysis of the less easily measurable elements of the framework, in particular changes in investor behaviour.
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