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Financial Contagion under Different Exchange Rate Regimes

Author

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  • Zsolt Darvas

    (Magyar Nemzeti Bank (at the time of writing the study))

  • György Szapáry

    (Magyar Nemzeti Bank)

Abstract

This paper reviews the contagion effects of the global financial crises of 1997-99 on five small open economies: the Czech Republic, Greece, Hungary, Israel and Poland. We analyze how the financial markets of these countries were effected under different exchange rate regimes. We look at the impact on exchange rates, interest rates and stock markets. In order to shed some light on the behavior of financial asset holders at times of global crises, we examine the sources of capital flows in Hungary for which country we were able to gather the detailed data necessary for such an analysis. Based on our findings, we offer some concluding remarks regarding the choice of exchange rate regime and the role of capital controls.

Suggested Citation

  • Zsolt Darvas & György Szapáry, 1999. "Financial Contagion under Different Exchange Rate Regimes," MNB Working Papers 1999/10, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:wpaper:1999/10
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    File URL: http://www.mnb.hu/letoltes/wp1999-10.pdf
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    Cited by:

    1. Bogdan Căpraru & Iulian Ihnatov, 2011. "The Effect Of Exchange Rate Arrangements On Transmission Of Interest Rates And Monetary Policy Independence: Evidence From A Group Of New Eu Member Countries "," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice (1954-2015), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 71-81, november.
    2. Martins Kazaks & Duo Qin, 2002. "Short-run lats rate movements: impact of foreign currency shocks via trade and financial markets," UCL SSEES Economics and Business working paper series 26, UCL School of Slavonic and East European Studies (SSEES).
    3. Maurizio Michael Habib, 2002. "Financial contagion, interest rates and the role of the exchange rate as shock absorber in Central and Eastern Europe," International Finance 0209004, University Library of Munich, Germany.
    4. Martins Kazaks & Duo Qin, 2002. "Short-run lats rate movements: impact of foreign currency shocks via trade and financial markets," UCL SSEES Economics and Business working paper series 26, UCL School of Slavonic and East European Studies (SSEES).
    5. repec:zbw:bofitp:2002_007 is not listed on IDEAS
    6. Habib, Maurizio Michael, 2002. "Financial contagion, interest rates and the role of the exchange rate as shock absorber in Central and Eastern Europe," BOFIT Discussion Papers 7/2002, Bank of Finland, Institute for Economies in Transition.
    7. Franziska Schobert, 2003. "Euroisation. Assessing the Loss of Seigniorage and the Impact on the Interest Premium in Central European Countries," Revue économique, Presses de Sciences-Po, vol. 54(5), pages 913-935.
    8. Zoican, Marius Andrei, 2009. "The quest for monetary integration – the Hungarian experience," MPRA Paper 17286, University Library of Munich, Germany.

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