Trade and Financial Contagion in Currency Crises

47 Pages Posted: 9 Feb 2006

See all articles by Francesco Caramazza

Francesco Caramazza

International Monetary Fund (IMF)

Luca A. Ricci

International Monetary Fund (IMF) - Research Department

Ranil Salgado

International Monetary Fund (IMF) - Research Department

Date Written: March 2000

Abstract

This paper investigates empirically the relevance of external, domestic, and financial weaknesses as well as trade and financial linkages in inducing financial crises for a sample of 61 emerging market and industrial countries. A panel probit estimation finds these economic indicators to be significant for emerging market countries during the Mexican, Asian, and Russian crises. In particular, the indicators of vulnerability to international financial spillover (common creditor) and of financial fragility (reserve adequacy) are highly significant and appear to explain the apparent regional concentration of these crises. Exchange rate regimes and capital controls, however, do not seem to matter.

Keywords: Currency crises, emerging markets, contagion, trade and financial spillovers

JEL Classification: F31, F32, F34, F41, G15

Suggested Citation

Caramazza, Francesco and Ricci, Luca Antonio and Salgado, Ranil, Trade and Financial Contagion in Currency Crises (March 2000). Available at SSRN: https://ssrn.com/abstract=879525 or http://dx.doi.org/10.2139/ssrn.879525

Francesco Caramazza (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Luca Antonio Ricci

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6007 (Phone)
202-623-4072 (Fax)

Ranil Salgado

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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