Exchange rate movements during the global financial crisis of 2007–09 were unusual. Unlike in two previous episodes – the Asian crisis of 1997–98 and the crisis following the Russian debt default in 1998 – in 2008 many countries that were not at the centre of the crisis saw their...

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...

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...

Two types of currency crisis models coexist in the literature: first generation models view speculative attacks as being caused by economic fundamentals which are inconsistent with a given parity. Second generation models claim self-fulfilling speculation as the main source of a currency crisis....

Contagion is an extremely important topic in finance. Contagion is at the core of most major financial crises, in particular the 2008 financial crisis. Although various approaches to quantifying contagion have been proposed, many of them lack a causal interpretation. We will present a new...

This article examines the extent of contagion and interdependence across the East Asian equity markets since early 1990s and compares the ongoing crisis with earlier episodes. Using the forecast error variance decomposition from a vector autoregression, we derive return and volatility spillover...

This article examines the extent of contagion and interdependence across the East Asian equity markets since early 1990s and compares the ongoing crisis with earlier episodes. Using the forecast error variance decomposition from a vector autoregression, we derive return and volatility spillover...

Before the crisis of 1997-98, the East Asian economies except for Japan but including China pegged their currencies to the U.S. dollar. To avoid further turmoil, the IMF now argues that these currencies should float more freely. However, our econometric estimations show that the dollar's...

Motivated by the observed international reserve hoarding behavior in the post-1997 crisis period, we explore the Mrs Machlup's wardrobe hypothesis and the related keeping-up-with-the-Joneses argument. It is conceived that, in addition to psychological reasons, holding a relatively high level of...

This working paper was written by Yin-wong Cheung (University of California, Santa Cruz) and XingWang Qian (University of California, Santa Cruz).Motivated by the observed international reserve hoarding behavior in the post-1997 crisis period, we explore the Mrs Machlup’s wardrobe hypothesis...