International Financial Contagion
edited by Stijn Claessens and Kristin Forbes
Within less than two years, a currency crisis that began in Thailand had spread throughout East Asia, Russia, and Brazil, affecting developed economies as well as emerging markets around the world. The scope and virulence of this international contagion was completely unexpected. In an attempt to better understand these events, a group of leading economists from international institutions, academic universities, and the private sector gathered at a conference sponsored by the International Monetary Fund, World Bank, and Asian Development Bank. The book, International Financial Contagion: How It Spreads and How It Can be Stopped, presents a selection of the papers presented at this conference.
This is the most extensive collection, to date, of research on international financial contagion. It includes survey articles and policy discussions, as well as detailed theoretical models and empirical analyses. Topics range from how to define contagion, to the relative importance of real versus financial linkages, to what policies could reduce contagion in the future. Many of the chapters perform empirical tests attempting to explain why crises spread, either by focusing on a specific transmission channel or an individual country or region. The chapters in this book have made impressive strides toward better understanding the causes and channels of international financial contagion.
"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