Autore
Fratzscher, Marcel

Titolo
What causes currency crises: Sunspots, contagion or fundamentals?
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1999 - Fascicolo: 39 - Pagina iniziale: 1 - Pagina finale: 45

This paper is an attempi to explain currency crises and exchange rate movements in open emerging markets during thè 1990s. A model is developed that allows a systematic comparison and evaluation of three competing explanations for crises: weak economie fundamentals, contagion and sunspots, i.e. exogenous shifts in agents' beliefs. Markov-switching regimes models and panel methodologies confimi that exogenous shifts in beliefs and in particular contagion, i.e. a high degree of real integration and financial interdependence among affected countries, are core explanations for thè financial crisis of thè 1990s. The model has a remarkably good out-of-sample predictive power. The findings suggest that thè degree of financial interdependence and real integration among emerging markets is thè single best indicator to explain and to predici which economies were hit and how severely they were affected by thè 1994-95 Latin American crisis and Ihe 1997-98 Asian crisis.



Testo completo: http://www.iue.it/ECO/WP-Texts/ECO99-39.pdf

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