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A Primer on Financial Contagion

Author

Listed:
  • Marcello Pericoli

    (Banca d'Italia)

  • Massimo Sbracia

    (Banca d'Italia)

Abstract

This paper presents a unified framework to highlight possible channels for the international transmission of financial shocks. We first review the different definitions and measures of contagion used in the literature. We then use a simple multi-country asset pricing model to cast the main elements of the current debate on contagion and provide a stylized account of how a crisis in one country can spread to the world economy. In particular, the model shows how crises can be transmitted across countries, without assuming market imperfections or DG KRF portfolio management rules. Finally, tracking our classification, we survey the results obtained in the empirical literature on contagion.

Suggested Citation

  • Marcello Pericoli & Massimo Sbracia, 2001. "A Primer on Financial Contagion," Temi di discussione (Economic working papers) 407, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_407_01
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    References listed on IDEAS

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    More about this item

    Keywords

    contagion; financial crisis; contagion;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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