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International Financial Contagion pp 19–41Cite as

Contagion: Why Crises Spread and How This Can Be Stopped

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Abstract

The financial turbulence that hit many East Asian countries in 1997, and then spread to other parts of the world, continued unabated in the fall of 1998. Russia defaulted on its debt as confidence in global financial markets evaporated. The turmoil next hit developed countries’ capital markets, dramatically altering the (relative) pricing of many financial instruments, which in turn accelerated the collapse of Long-Term Capital Management (LTCM), a large U.S. hedge fund. The turmoil subsequently affected Brazil, where it created large uncertainties about that country’s ability to rollover its public sector debt, thus spilling over into other Latin American emerging markets and elsewhere (see further World Bank, 1999 and International Monetary Fund, 1999).

The opinions expressed are not necessarily those of the World Bank. An earlier version of this paper was prepared for discussion at the WIDER workshop on financial contagion held at the World Bank on June 3–4 and reflects comments from participants.

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Author information

Authors and Affiliations

  1. World Bank, USA

    Stijn Claessens

  2. Massachusetts Institute of Technology, USA

    Rudiger Dornbusch

  3. Korea University, Korea

    Yung Chul Park

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  1. Stijn Claessens
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  2. Rudiger Dornbusch
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  3. Yung Chul Park
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Editors and Affiliations

  1. The World Bank, USA

    Stijn Claessens

  2. Massachusetts Institute of Technology, USA

    Kristin J. Forbes

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© 2001 Springer Science+Business Media New York

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Claessens, S., Dornbusch, R., Park, Y.C. (2001). Contagion: Why Crises Spread and How This Can Be Stopped . In: Claessens, S., Forbes, K.J. (eds) International Financial Contagion. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-3314-3_2

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  • DOI: https://doi.org/10.1007/978-1-4757-3314-3_2

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