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Currency crisis transmission through international trade

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  • Haidar, Jamal Ibrahim

Abstract

The Eurozone recent crisis has shown how balance of payments problems in less developed European Monetary Union (EMU) member countries can affect EMU trading partners, spreading the crisis to a larger group of countries. This paper introduces a three-country dynamic general equilibrium model to analyze whether and how terms of trade effects can generate a spillover effect or a currency crisis transmission between countries. Specifically, using a two period model, it incorporates world market clearing conditions for tradables into a new theoretic model, analyzes net capital flow movements between countries, and establishes cross-border macroeconomic linkages. This paper shows how a currency crisis can transmit through the real (trade) sector channel of the economy.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 2 ()
Pages: 151-157

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:151-157

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: International trade; General equilibrium model; Currency crisis; Contagion; Capital flows; Exchange rate movement;

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References

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Cited by:
  1. Jamal Ibrahim Haidar, 2012. "Sovereign Credit Risk in the Eurozone," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(1), pages 123-136, January.
  2. Gani, Azmat & Al Mawali, Nasser Rashid, 2013. "Oman's trade and opportunities of integration with the Asian economies," Economic Modelling, Elsevier, vol. 31(C), pages 766-774.

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