Arbeitspapier

Contagion of currency crises: Some theoretical and empirical analysis

This paper investigates contagion effects. In a model with highly and lowly informed investors we show that a currency crisis in one country can trigger a crisis in another country. Portfolio losses of the highly informed investors in one country will force them to withdraw capital from the other country. The behavior of the lowly informed investors multiplies this effect and the other country becomes more and more vulnerable. In the empirical part we focus on the Asian crisis (1997/98). Using a LOGIT approach we can show that contagion, in the sense of a crisis not explainable by economic fundamentals but by exchange rate losses resulting from investment in other countries, seems to have caused the currency crises of the Philippines and especially of Singapore.

Language
Englisch

Bibliographic citation
Series: Research Notes ; No. 02-2

Classification
Wirtschaft
Subject
Contagion
Currency crises
Asian crisis
Währungskrise
Portfolio-Investition
Unvollkommene Information
Kapitalmobilität
Internationaler Preiszusammenhang
Zwei-Länder-Modell
Schätzung
Theorie
Asien

Event
Geistige Schöpfung
(who)
Karmann, Alexander
Greßmann, Oliver
Hott, Christian
Event
Veröffentlichung
(who)
Deutsche Bank Research
(where)
Frankfurt a. M.
(when)
2002

Handle
Last update
10.03.2025, 11:41 AM CET

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Object type

  • Arbeitspapier

Associated

  • Karmann, Alexander
  • Greßmann, Oliver
  • Hott, Christian
  • Deutsche Bank Research

Time of origin

  • 2002

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