‘International financial contagion in currency crises’, Caramazza, F., Ricci, L. & Salgado, R. (2004) Journal of International Money and Finance, 23 (1), February, pp. 51–70.
Analyze the techniques and assumptions used by the authors to investigate the importance of financial weaknesses and linkages in the three crises described. On the basis of the evidence presented, how convincing is their conclusion of the following: ‘The common creditor is the most important and significant variable, and provides an economic explanation for the regional concentration of crises’.
In the article International financial contagion in currency in crises the author has looked at different linkages which led to the crises. One of the main features of the crises was that it spread from one nation to other nation. This event is termed as the contagion. All the three currency crises, Mexican crisis, Asian crisis and lastly the Russian crisis have the same phenomenon of the crises spreading from one nation to other.
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