What were the main causes of the Asian financial crisis?
The Asian Financial Crisis is a crisis caused by the collapse of the currency exchange rate and hot money bubble. The financial crisis started in Thailand in July 1997 after the Thai baht plunged in value. It then swept over East and Southeast Asia.
What are the lesson learned from the Asian financial crisis?
Perhaps the key lesson from the Asian crisis is that weaknesses in the banking and financial sector can feed into a balance of payments crisis and intensify disruptions in the wider economy. Asian banking systems, it is now realized, had several sources of vulnerability. Governance structures were weak.
How did the Asian financial crisis spread?
The 1997–98 Asian financial crisis began in Thailand and then quickly spread to neighbouring economies. It began as a currency crisis when Bangkok unpegged the Thai baht from the U.S. dollar, setting off a series of currency devaluations and massive flights of capital.
What is global financial contagion?
Financial contagion refers to “the spread of market disturbances – mostly on the downside – from one country to the other, a process observed through co-movements in exchange rates, stock prices, sovereign spreads, and capital flows”. Financial contagion happens at both the international level and the domestic level.
What is contagion and how does it affect the financial system?
A contagion is the spread of an economic crisis from one market or region to another and can occur at both a domestic or international level. Usually associated with credit bubbles and financial crises, contagions can be manifested as a crash in one market leading to a crash in other markets.
What is the difference between spillover and contagion?
In other words, if the strength in the co-movement is of the order of magnitude of the researcher’s believes, then it is called spillover, but if the co-movement is higher, then it is interpreted as contagion.
What sort of risk is associated with contagion?
The risk of contagion in banking—also referred to as systemic risk—is here defined as the risk that financial difficulties at one or more bank(s) spill over to a large number of other banks or the financial system as a whole. Contagion can spread either through the information channel or the credit channel.
What is meant by financial contagion?
What is an example of contagion theory?
Examples of Contagion Theory If a people interested in country music goes to a rock concert along with friends and the friends are enjoying very much, the person will start to enjoy too due to group feeling and mass contagion. The person forgets his/her own likes and dislikes to follow the group behavior.
What is the concept of contagion?
A contagion is the spread of an economic crisis from one market or region to another and can occur at both a domestic or international level.