Working Paper: NBER ID: w5681
Authors: Barry Eichengreen; Andrew K. Rose; Charles Wyplosz
Abstract: This paper is concerned with the fact that the incidence of speculative attacks tends to be temporally correlated; that is, currency crises appear to pass contagiously from one country to another. The paper provides a survey of the theoretical literature, and analyzes the contagious nature of currency crises empirically. Using thirty years of panel data from twenty industrialized countries, we find evidence of contagion. Contagion appears to spread more easily to countries which are closely tied by international trade linkages than to countries in similar macroeconomic circumstances.
Keywords: currency crises; contagion; speculative attacks
JEL Codes: F31; F33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Crisis in one country (H12) | Increase in probability of speculative attack in another country (F65) |
| Crisis in one country (H12) | Contagion effect in another country (F65) |
| Strong trade ties (F10) | Increased spread of crises among countries (F65) |
| Macroeconomic conditions (E66) | Revision of investors' expectations (D84) |
| Trade linkages (F19) | Primary channel for contagion (F65) |