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Containing Contagious Financial Crises: The Political Economy of Joint Intervention into the Asian Crisis

  • Hausken, Kjell
  • Plumper, Thomas

The notion of contagion has changed the way scientists perceive financial crises, causing heated debate on the political economy of crisis intervention. Based on a formal model that shows how a financial crisis can escalate and spread contagiously, this article analyzes game-theoretically how a financial market crisis can be contained through intervention. The central focus is the role that international organizations play in overcoming the collective action problem of joint intervention. It is argued that the IMF support programs were helpful, and probably necessary in a class of cases we analyze more carefully, in surpassing the threshold level of collective action. Copyright 2002 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 111 (2002)
Issue (Month): 3-4 (June)
Pages: 209-36

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Handle: RePEc:kap:pubcho:v:111:y:2002:i:3-4:p:209-36
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  1. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," NBER Working Papers 6559, National Bureau of Economic Research, Inc.
  2. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper tigers? A model of the Asian crisis," Research Paper 9822, Federal Reserve Bank of New York.
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  8. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
  9. Charles W. Calomiris, 1998. "The IMF's Imprudent Role As Lender of Last Resort," Cato Journal, Cato Journal, Cato Institute, vol. 17(3), pages 275-294, Winter.
  10. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  11. Palma, Gabriel, 1998. "Three and a Half Cycles of 'Mania, Panic, and [Asymmetric] Crash': East Asia and Latin America Compared," Cambridge Journal of Economics, Oxford University Press, vol. 22(6), pages 789-808, November.
  12. Allan H. Meltzer, 1998. "Asian Problems and the IMF," Cato Journal, Cato Journal, Cato Institute, vol. 17(3), pages 264-274, Winter.
  13. Sarno, Lucio & Taylor, Mark P., 1999. "Moral hazard, asset price bubbles, capital flows, and the East Asian crisis:: the first tests," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 637-657, August.
  14. Waft Grais & Kangbin Zheng, 1996. "Strategic Interdependence in European East-West Gas Trade: A Hierarchical Stackelberg Game Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 61-84.
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