Advanced Search
MyIDEAS: Login

How Much Does Trade and Financial Contagion Contribute to Currency Crises? The Case of Korea

Contents:

Author Info

  • Duo Qin

    (Queen Mary and Westfield College, University of London)

Registered author(s):

Abstract

The prime task of modelling cross-market contagion is to predict the imminence of a pestilent currency crisis. Empirical models are developed here to study the roles and channels of contagion in exchange rate volatilities, in ways which are as economically sound and econometrically simple as possible. Korea is used as the susceptible and eight adjacent economies as the potential infective. Two channels of contagion are investigated -- trade linkage and financial market linkage. Two key features of the latter channel are carefully specified -- the changing degrees of infectiveness of a neighbouring economy due to its changing capital mobility, and the changing intensity of currency speculation in response to the changing vulnerability of the susceptible. By using monthly data prior to the 1997 Korean won crisis, the models predict a looming currency collapse. Since the respective roles of major internal and external factors which propagate shocks to the won rate are carefully identified in the models, it is thus manifest that contagion indeed played a major role in the won collapse, that financial contagion was the main culprit whereas trade contagion played only a minor part, and that the susceptible is especially prone to shocks from economies which are structurally similar to or weaker than it.

Download Info

If 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.
File URL: http://www.econ.qmul.ac.uk/papers/doc/wp410.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 410.

as in new window
Length:
Date of creation: Mar 2000
Date of revision:
Handle: RePEc:qmw:qmwecw:wp410

Contact details of provider:
Postal: London E1 4NS
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC

Related research

Keywords: Currency crisis; Trade contagion; Financial contagion; Infective; Susceptible; Capital mobility; International financial market; Herding; Heterogeneous trading; Currency speculation; Discrete-state regression;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp410. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nick Vriend).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.