Financial Crises and Contagion in Emerging Market Countries

by Julia F. Lowell, C. Richard Neu, Daochi Tong


Download eBook for Free

FormatFile SizeNotes
PDF file 2.9 MB

Use Adobe Acrobat Reader version 10 or higher for the best experience.


Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback75 pages $10.00 $8.00 20% Web Discount

Explores why some financial crises appear to be contagious, and why some financial markets in emerging market countries appear to be vulnerable to contagion whereas others are not. The authors analyze multicountry crisis episodes from January 1989 to August 1997 and develop four informal models of transition mechanisms: (1) "Economic linkages" describes the case where a foreign financial crisis acts as a common shock to countries with strong economic linkages to the country in crisis; (2) "heightened awareness" suggests that investors with incomplete information may ignore poor economic conditions in some countries until a crisis occurs somewhere else, at which point they dump their investments in those countries; (3) "portfolio adjustment" describes what happens when liquidity-constrained portfolio managers sell off other countries' assets in order to meet an expected increase in redemptions from a country in crisis; (4) "herd behavior" is probably the most widely accepted view of contagion, suggesting that investors abandon their investments largely in response to what they think other investors are doing. Finally, case studies of Argentina, South Africa, and Thailand illustrate the usefulness of the models.

Table of Contents

  • Chapter 1


  • Chapter 2

    Crisis Identification

  • Chapter 3

    Empirical Analysis

  • Chapter 4

    Four Informal Models of Financial Contagion

  • Chapter 5

    The Evolution of Financial Crises: Three Case Studies

  • Chapter 6


This report is part of the RAND Corporation Monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.