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