Vulnerability to Purely Contagious Balance of Payment Crises in Emerging Economies: An Application to the Cases of Russia, Turkey, and Brazil
AbstractWe explore the possible role of interdependence of expectations in emerging market economies and analyze the crisis transmission mechanism within the âpureâcontagion framework. We consider the cases of Russia, Turkey, and Brazil, and assess whether the fundamentals of these countries allowed for the possibility of âpureâcontagion eÂ¤ects from each other. In particular, we look at Russia - Turkey and Brazil - Russia pairs in year 1997 to see whether Brazilian and the Turkish economies exhibited vulnarability to pure contagion before the 1998 Russian crisis We also repeat the same exercise with the most recent 1999 data. The rationale for choosing these pairings is the huge volume of (luggage) trade between geographical neighbors Russia and Turkey, and the similar export structures of Russia and Brazil (predominantly raw materials) which are continents apart. Our results clearly indicate vulnerability of Brazilian and Turkish economies to high probability of crisis in Russia even in the face of improving fundamentals. In isolation, Brazilian and Turkish fundamentals were not weak enough to place them in a sure-crisis situation. With the incorporation of the Russian link, the multiple equilibria setting disappeared for both countries, rendering sure-crisis as the single equilibrium solution.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bogazici University, Department of Economics in its series Working Papers with number 2001/03.
Date of creation: Mar 2001
Date of revision:
Contact details of provider:
Postal: Natuk Birkan Hall, Bebek, 34342 İstanbul
Phone: +90 (212) 359-6505
Fax: +90 (212) 287-2453
Web page: http://www.econ.boun.edu.tr/
More information through EDIRC
Other versions of this item:
- Akçay, Cevdet & Zenginobuz, Unal, 2000. "Vulnerability to purely contagious balance of payment crises in emerging economies: An application to the cases of Russia, Turkey, and Brazil," MPRA Paper 195, University Library of Munich, Germany.
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roberto Chang & Andres Velasco, 1998.
"Financial crises in emerging markets: a canonical model,"
98-10, Federal Reserve Bank of Atlanta.
- Chang, R. & Velasco, A., 1998. "Financial Crises in Emerging Markets: A Canonical Model," Working Papers 98-21, C.V. Starr Center for Applied Economics, New York University.
- Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
- Paul R. Masson, 1999.
"Multiple Equilibria, Contagion, and the Emerging Market Crises,"
IMF Working Papers
99/164, International Monetary Fund.
- Paul Masson, 1999. "Multiple equilibria, contagion, and the emerging market crises," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
- Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
- V.V. Chari & Patrick J. Kehoe, 1999. "Asking the right questions about the IMF," Annual Report, Federal Reserve Bank of Minneapolis, pages 3-26.
- Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996.
"The Mexican Peso Crisis: Sudden Death or Death Foretold?,"
Harvard Institute of Economic Research Working Papers
1760, Harvard - Institute of Economic Research.
- Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1996. "The Mexican peso crisis: Sudden death or death foretold?," Journal of International Economics, Elsevier, vol. 41(3-4), pages 265-283, November.
- Sachs, J. & Tornell, A. & Velasco, A., 1996. "The Mexican Peso Crisis: Sudden Death or Death Foretold?," Working Papers 96-20, C.V. Starr Center for Applied Economics, New York University.
- Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996. "The Mexican Peso Crisis: Sudden Death or Death Foretold?," NBER Working Papers 5563, National Bureau of Economic Research, Inc.
- Roberto Chang & Andres Velasco, 1998.
"The Asian Liquidity Crisis,"
NBER Working Papers
6796, National Bureau of Economic Research, Inc.
- Jeanne, Olivier, 1997. "Are currency crises self-fulfilling?: A test," Journal of International Economics, Elsevier, vol. 43(3-4), pages 263-286, November.
- Paul R. Masson, 1998. "Contagion-Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 98/142, International Monetary Fund.
- Masson, Paul, 1999. "Contagion:: macroeconomic models with multiple equilibria," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 587-602, August.
- Hakan Berument & N. Nergiz Dincer, 2004. "Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? : The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 40(4), pages 20-32, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lutfu Gozgucu).
If references are entirely missing, you can add them using this form.