Stijn claessens university of amsterdam and world bank. Disease transmission by direct or indirect contact. A currency crisis in thailand quickly spread throughout east asia and then on to russia and brazil. Contagion is the spread of market changes or disturbances from one regional market to others. When the connections among the countries are slim, this phenomenon has come to be known as financial contagion. Identifying international financial contagion mardi. Doddfrank is largely premised on the diagnosis that connectedness was the. The chapters in this book have made impressive strides toward better understanding the causes and channels of international financial contagion. Before 1997, the term contagion usually referred to the spread of a medical disease. An overview of the issues and the book stijn claessens world bank kristin forbes massachusetts institute of technology and nber contagion. Financial crisis, contagion, and containment is thoughprovoking for economic and financial practitioners who want to better understand financial crises and the imfs attendant policy responses. It brings together representatives from international institutions and. The individual contributions bridge the gap between econometric theory and evidence, while the comprehensive range of financial market and country regions under consideration highlights the future challenges facing econometricians, international policymakers, and financial practitioners.
Financial institutions, financial contagion, and financial crises, imf working papers 0092, international monetary fund. Professor rigobons research has examined international economics, monetary economics, and development economics, focusing on the causes of balanceofpayments crises. International financial contagion pdf,, download ebookee alternative excellent tips for a better ebook reading. Mar 24, 2017 in summary, financial crisis, contagion, and containment is thoughtprovoking for economic and financial practitioners who want to better understand financial crises and the imfs attendant policy responses. Measuring the risk of financial contagion world economic. It helps explain an economic crisis extending across neighboring countries, or even regions. 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. Andy haldane, the bank of englands chief economist, subscribes to the analogy between disease epidemics and financial contagion. International financial contagion stijn claessens, kirsten. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political, partisan or national interests. The international monetary fund suggests that capital controls might be useful as an antidote to contagion.
We provide a model of contagion where countries borrow or lend for consumption smoothing at the market interest rate or a lower imf rate. International financial contagion in currency crises sciencedirect. When lehman brothers filed for bankruptcy on september 15, 2008, it was the largest such filing in u. Financial contagion can be a potential risk for countries who are trying to integrate their financial system with international financial markets and institutions. International financial contagion, which happens in both advanced. Financial contagion happens at both the international level and the domestic level.
International financial contagion in currency crises. The study of financial crisis has increasingly focused on the contagion effect, on the channels of international transmission of a crisis neal and weidenmier, 2003. International financial contagion stijn claessens, kristin. It brings together representatives from international institutions and private sectors. Although a professional consensus on the appropriate definitions of contagion has yet to emerge, we document substantial research progress towards this goal. International financial contagion stijn claessens, kristin forbes auth. Financial contagion refers to the spread of market disturbances mostly on the downside. International financial contagion is a collection of papers presented at a conference on international financial contagion. The author first provides a brief introduction of the contagious spillover of recent financial market crises and models the. Financial crises propagate across countries either when a crisis has a simultaneous impact on various economies or when it spreads from the initial center to other economies.
It includes survey articles and policy discussions, as well as detailed theoretical models and empirical analyses. A disease that is or may be transmitted by direct or indirect contact. In summary, financial crisis, contagion, and containment is thoughtprovoking for economic and financial practitioners who want to better understand financial crises and the imfs attendant policy responses. International financial contagion 2001, hardcover for. With great indignation every asian economy pointed fingers. No sooner had the asian crisis broken out in 1997 than the witchhunt started. The doddfrank act of 2010 was intended to reform financial policies in order to prevent another massive crisis such as the financial meltdown of 2008. The resulting reduction in loanable funds raises interest rates, increases the vulnerability of other indebted countries, and can generate further rounds of defaults. Contagion can refer to the diffusion of either economic booms or economic crises throughout a.
Conceptual and empirical issues kristin forbes and roberto rigobon. Sep 09, 2019 contagion is the spread of market changes or disturbances from one regional market to others. Scott is the emeritus nomura professor of international financial systems at harvard law school hls, where he taught from 19752018. Aug 24, 2015 the international monetary fund suggests that capital controls might be useful as an antidote to contagion. The viral threat to the wealth of nations covers a lot of territory. International financial contagion may 1999 the world economic outlook presents the imf staffs analysis and projections of economic developments at the global level, in major country groups classified by region, stage of development, etc. Download this book is an authoritative account of the economic and political roots of the 2008 financial crisis. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy. Financial institutions, financial contagion, and financial crises, econometric society world congress 2000 contributed papers 1595, econometric society. It examines why it was triggered in the united states, why it morphed into the great recession, and why the contagion spread with such ferocity around the globe. When the connections among the countries is slim, this phenomenon has come to be known as financial contagion. An overview of the issues and the book stijn claessens and kristin forbes. Contagion is one of the most commonly referenced yet least understood notions in international finance.
Kop international financial contagion av stijn claessens, kirsten forbes pa. International financial contagion 2001, hardcover for sale. An argument that contagion is the most significant risk facing the financial system and that doddfrank has reduced the governments ability to respond effectively. Identifying international financial contagion mardi dungey. Chapter 1 international financial contagion mit sloan.
This book is an authoritative account of the economic and political roots of the 2008 financial crisis. International financial integration and crisis contagion. This paper attempts a synthesis of theoretical and empirical work on international financial contagion. This barcode number lets you verify that youre getting exactly the right version or edition of a book.
Although originally written in 2003, the book remains relevant today. In the late 2000s, the subprime mortgage crisis tore through the global financial system. This research foundation monograph provides an introduction to this fascinating subjectdefinitions of the term, instances of contagion in the 1990s, the theories that attempt to explain it, previous evidence from tests of the theories. It is, of course, terribly important to analyze case histories to discover potential triggers, mechanisms of transmission, and viable ways to contain the damage of financial contagion. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy measures to help avoid, or at least contain, financial crises. The fundamental reason for the crisis was this or that most prominently contagion but also the decline in exports of the new. Highly indebted countries hit by large negative shocks to output will default. Pdf global financial contagion download ebook for free. Thats financial contagion, and sometimes the epidemiology makes. This is the most extensive collection to date of research on international financial contagion. International financial integration and crisis contagion nber.
In the aftermath of the 1997 asian crisis and the 1998 russian debacle, investors saw contagion looming around every corner and began to question the benefits of international diversificationin particular, investment in emerging markets. International financial contagion by international monetary fund. This research foundation monograph provides an introduction to this fascinating subjectdefinitions of the term, instances of contagion in the 1990s, the theories that attempt to explain it, previous evidence from tests of the. Emerging market economy financial crises in recent years have often quickly spread to other countries. It examines why it was triggered in the united states, why it. Contagion is a long standing idea in explanations for the spread of bank runs, but it has also been used to describe the spread of strikes across. International financial integration helps to diversify risk but also may increase the trans mission of crises across countries. Imf world economic outlook weo, international financial. Kolb, 9780470922385, available at book depository with free delivery worldwide. The individual contributions bridge the gap between econometric theory and evidence, while the comprehensive range of financial market and country regions under consideration highlights the futurechallenges facing econometricians, international policymakers, and financial practitioners. As kucharski notes, any form of contagion is a social process. Likewise, japans financial crisis in the 1990s had repercussions all. The similarity between disease outbreaks and financial behaviour, he explains, has seen scientists offering expertise to the moneymen. Financial contagion financial definition of financial.
Financial contagion wiley online books wiley online library. International financial integration, financial globalization, financial capital market regulation, financial crisis and international financial contagion, and the issues of financial. This paper provides an overview of recent theories of international financial contagion, with a focus on models in which the balance sheet constraints of global banks and other financial institutions are the key of international transmission. International finance and macroeconomics international financial integration helps to diversify risk but also may increase the trans mission of crises across countries. International financial contagion stijn claessens springer.
This book presents a selection of the papers given at this conference. Financial contagion an overview sciencedirect topics. Why crises spread and how this can be stopped stijn claessens, rudiger dornbusch and yung chul park. Financial crisis, contagion, and containment princeton. Financial contagion ebook by 9781118016527 rakuten kobo. Modeling international financial markets contagion. Throughout the book, kolb offers valuable insights on this dilemma. The growing interconnectedness of the global economy makes it increasingly prone to contagion. A currency crisis in thailand quickly spread throughout east asia and then on to russia. In 1997 a crash in the price of the thai currency created a financial contagion that swept through asian economies imf, 1998 and caused crises in financial markets in the united states, europe, russia, and latin america timeline, 1997. Apr 06, 2020 international financial contagion may 1999 the world economic outlook presents the imf staffs analysis and projections of economic developments at the global level, in major country groups classified by region, stage of development, etc.
The idea that uncertainty about the recovery rate is crucial for the amount of contagion is put forward also in a recent work by battiston et al. Financial contagion a negative occurrence in one market, industry, or country that impacts other markets, industries, or countries. International financial contagion 2001st edition by stijn claessens author, kristin forbes author isbn. His hls courses were on capital markets regulation, international finance, the payment system and securities regulation. The world economic outlook, published twice a year in english, french, spanish, and arabic, presents imf staff economist. A lexisnexis search for contagion before this year finds hundreds of examples in major newspapers, almost none of which refer to turmoil in international financial markets. International financial integration and crisis contagion michael b. The world economic forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Download international financial contagion pdf ebook. The author first provides a brief introduction of the contagious spillover of recent financial market crises and models the pattern of these crises. Using panel probit regressions on 41 emerging market countries, it finds that financial linkages played a significant role in the spread of the mexican, asian, and. International policy organisations have conducted expost analyses of the losses emerged. Yossi sheffi, in finance and risk management for international logistics and the supply chain, 2018.
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