International Financial Contagion

1. Front Matter

   Pages i-xi

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2. Overview: The Theory and Empirics of Contagion

   1. Front Matter

      Pages 1-1

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   2. International Financial Contagion: An Overview of the Issues and the Book

      • Stijn Claessens, Kristin Forbes

      Pages 3-17

   3. Contagion: Why Crises Spread and How This Can Be Stopped

      • Stijn Claessens, Rudiger Dornbusch, Yung Chul Park

      Pages 19-41

   4. Measuring Contagion: Conceptual and Empirical Issues

      • Kristin Forbes, Roberto Rigobon

      Pages 43-66

   5. The Channels for Financial Contagion

      • Matt Pritsker

      Pages 67-95

3. Specific Mechanisms Driving Contagion

   1. Front Matter

      Pages 97-97

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   2. Crisis Transmission: Evidence from the Debt, Tequila, and Asian Flu Crises

      • José De Gregorio, Rodrigo O. Valdés

      Pages 99-127

   3. Flight to Quality: Investor Risk Tolerance and the Spread of Emerging Market Crises

      • Barry Eichengreen, Galina Hale, Ashoka Mody

      Pages 129-155

   4. Mutual Fund Investment in Emerging Markets: An Overview

      • Graciela Kaminsky, Richard Lyons, Sergio Schmukler

      Pages 157-185

   5. Portfolio Diversification, Leverage, and Financial Contagion

      • Garry J. Schinasi, R. Todd Smith

      Pages 187-221

4. Case Studies of Contagion

   1. Front Matter

      Pages 223-223

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   2. Thai Meltdown and Transmission of Recession within the ASEAN4 and NIE4

      • Tilak Abeysinghe

      Pages 225-240

   3. Financial Contagion in the East Asian Crisis: With Special Reference to the Republic of Korea

      • Yung Chul Park, Chi-Young Song

      Pages 241-265

   4. The Russian Default and the Contagion to Brazil

      • Taimur Baig, Ilan Goldfajn

      Pages 267-299

   5. Contagion of International Financial Crises: The Case of Mexico

      • Santiago Bazdresch, Alejandro M. Werner

      Pages 301-328

   6. Financial Market Spillovers: How Different are the Transition Economies?

      • Gaston Gelos, Ratna Sahay

      Pages 329-366

   7. Are Financial Crises Becoming More Contagious?: What is the Historical Evidence on Contagion?

      • Michael D. Bordo, Antu Panini Murshid

      Pages 367-403

5. Implications for Policy and the International Financial Architecture

   1. Front Matter

      Pages 405-405

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   2. International Contagion: Implications for Policy

      • Roberto Chang, Giovanni Majnoni

      Pages 407-430

No sooner had the Asian crisis broken out in 1997 than the witch-hunt started. With great indignation every Asian economy pointed fingers. They were innocent bystanders. The fundamental reason for the crisis was this or that - most prominently contagion - but also the decline in exports of the new commodities (high-tech goods), the steep rise of the dollar, speculators, etc. The prominent question, of course, is whether contagion could really have been the key factor and, if so, what are the channels and mechanisms through which it operated in such a powerful manner. The question is obvious because until 1997, Asia's economies were generally believed to be immensely successful, stable and well managed. This question is of great importance not only in understanding just what happened, but also in shaping policies. In a world of pure contagion, i.e. when innocent bystanders are caught up and trampled by events not of their making and when consequences go far beyond ordinary international shocks, countries will need to look for better protective policies in the future. 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.

• ASEAN
• East Asia
• Financial Market
• Investment
• Portfolio

`It is difficult to avoid being impressed by the very high level of quality in this research collection. For those who attended the conference meetings, this comes as no surprise since the atmosphere was wonderfully dynamic and full of tough give and take. That flavor is not lost in this more formal rendition. Before this conference, very little was available in this area. Policy makers, policy research departments and students of emerging-market finance will find a wealth of information in this book. They will also find some answers, plenty of controversy, and lots of open questions.'
Rudiger Dornbusch, Massachusetts Institute of Technology

• The World Bank, USA

  Stijn Claessens

• Massachusetts Institute of Technology, USA

  Kristin J. Forbes

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