Abstract
The recent series of financial crises in emerging markets, the Mexican crisis of 1994–95 and the Asian crisis of 1997–98, closely followed by the devaluations of the ruble and the real, have been decried for their virulence and their far-reaching effects beyond their epicenters. Certainly this recent batch of crises has been particularly severe.1 Yet, that crises can spread across international borders should not, of its own accord, be surprising; it is merely a reflection of the interdependence of cross-country fortunes in the presence of real and identifiable channels of transmission. Moreover, in the face of macroeconomic imbalances and/or structural weaknesses, crises, when they arrive, may simply be a reflection of unsound economic policies or inefficiencies that are fostered in an underdeveloped financial infrastructure. As the October 1997 crash on the Hong Kong Exchange demonstrated, however, good fundamentals alone cannot insulate a country from the effects of financial contagion.2 Moreover, the sharp drops on the Brazilian exchange and the eventual devaluation of the real, following the Russian crisis, are difficult to attribute to bad fundamentals or cross-country linkages.3
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Bordo, M.D., Murshid, A.P. (2001). Are Financial Crises Becoming More Contagious?: What is the Historical Evidence on Contagion? . In: Claessens, S., Forbes, K.J. (eds) International Financial Contagion. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-3314-3_14
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DOI: https://doi.org/10.1007/978-1-4757-3314-3_14
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