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How much does trade and financial contagion Contribute to currency crises? : The case of Korea

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  • How much does trade and financial contagion Contribute to currency crises?
  • Qin, Duo
  • University of London


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Title How much does trade and financial contagion Contribute to currency crises?
Similar Titles
Sub Title

The case of Korea

Material Type Reports
Author(English)

Qin, Duo

Publisher

London:University of London

Date 2000-03
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Economy < Trade
Economy < Economic Conditions
Holding University of London

Abstract

The prime task of modeling cross-market contagion is to predict the imminence of a pestilent currency crisis. Empirical models are developed here to study the roles and channels of contagion in exchange rate volatilities, in ways which are as economically sound and econometrically simple as possible. Korea is used as the susceptible and eight adjacent economies as the potential infective. Two channels of contagion are investigated-trade linkage and financial market linkage. Two key features of the latter channel are carefully specified-the changing degrees of infectiveness of a neighbouring economy due to its changing capital mobility, and the changing intensity of currency speculation in response to the changing vulnerability of the susceptible. By using monthly data prior to the 1997 Korean won crisis, the models predict a looming currency collapse. (The rest omitted)