The Channels for Financial Contagion

Abstract

The seriousness of the Asian financial crises and difficulties in explaining its spread have led to fears of irrational contagion. This paper studies rational channels through which contagion might have spread and highlights those factors which make a country susceptible to contagion. The rational channels studied in the paper are contagion via real sector linkages, financial market linkages, financial institution linkages, and through the interaction of financial institutions and financial markets. The latter channel is suggested as a possible factor in the reductions in financial market liquidity and the flight to quality following news of significant losses at the hedge fund Long Term Capital Management.

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Cite this paper

@inproceedings{Pritsker2000TheCF, title={The Channels for Financial Contagion}, author={Matt Pritsker}, year={2000} }