DP1453 Contagious Currency Crises

Author(s): Barry Eichengreen , Andrew K Rose , Charles Wyplosz

Publication Date: August 1996

Keyword(s): Channels , Data , International , Macroeconomic , Panel , Similarity , Speculative , Trade

JEL(s): F31

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP1453.asp

This paper is concerned with the fact that the incidence of speculative attacks tend 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 analyses the contagious nature of currency crises empirically. Using 30 years of panel data from 20 industrialized countries, we find evidence of contagion. Contagion appears to spread more easily to countries that are closely tied by international trade linkages than to countries in similar macroeconomic circumstances.