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Currency crisis transmission through international trade

  • Haidar, Jamal Ibrahim

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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File URL: http://www.sciencedirect.com/science/article/pii/S0264999311002197
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Goldberg, Linda S., 1990. "Predicting Exchange Rate Crises: Mexico Revisited," Working Papers 90-11, C.V. Starr Center for Applied Economics, New York University.
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  12. Takatoshi Ito & Yuko Hashimoto, 2005. "High-Frequency Contagion of Currency Crises in Asia ," Asian Economic Journal, East Asian Economic Association, vol. 19(4), pages 357-381, December.
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