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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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  • Haidar, Jamal Ibrahim, 2012. "Currency crisis transmission through international trade," Economic Modelling, Elsevier, vol. 29(2), pages 151-157.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:151-157 DOI: 10.1016/j.econmod.2011.09.001

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    References listed on IDEAS

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    2. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-484, December.
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    13. Kristin J. Forbes, 2002. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 77-132 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Cheng, Wenli & Zhang, Dingsheng, 2016. "How might the South be helped by Northern technology yet harmed by Northern money?," Economic Modelling, Elsevier, vol. 55(C), pages 83-91.
    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.
    3. Shen, Pei-Long & Li, Wen & Wang, Xiao-Ting & Su, Chi-Wei, 2015. "Contagion effect of the European financial crisis on China's stock markets: Interdependence and pure contagion," Economic Modelling, Elsevier, vol. 50(C), pages 193-199.
    4. Jamal Ibrahim Haidar, 2012. "Sovereign Credit Risk in the Eurozone," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(1), pages 123-136, January.

    More about this item


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

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance


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