Pure Contagion and Investors Shifting Risk Appetite: Analytical Issues and Empirical Evidence
AbstractThis paper discusses a "pure" form of financial contagion, unrelated to economic fundamentals - investors' shifting appetite for risk. It provides an analytical framework for identifying changes in investors' risk appetite and discusses whether it is possible to directly measure them in a way that can enable policy makers to differentiate between financial contagion and domestic fundamentals as the immediate source of a crisis. Daily measures of risk appetite are computed and their usefulness in predicting financial crises is assessed.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 01/134.
Date of creation: 01 Sep 2001
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