This paper analyzes the impact of uncertainty on the spread of stock market crises, both theoretically and empirically. The effect of uncertainty about the fundamentals on investment decisions is an important cause of financial crises propagating across countries. Firstly, a coordination game on...

We analyse the effect of the uncertainty about the fundamentals on the probability of sudden stops of capital flows from a theoretical and empirical perspective. Our model predicts that the probability of crises increases with the uncertainty, ie. the dispersion of private signals about the true...