Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/264483 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2658
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We offer a theory of financial c ontagion b ased o n t he i nformation c hoice o f i nvestors after observing a financial crisis e lsewhere. We study global coordination games of regime change in two regions linked by an initially unobserved macro shock. A crisis in region 1 is a wake-up call to investors in region 2. It induces them to reassess the regional fundamental and acquire information about the macro shock. Contagion can occur even after investors learn that region 2 has no ex-post exposure to region 1. We explore normative and testable implications of the model. In particular, our results rationalize evidence about contagious currency crises and bank runs after wake-up calls and provide some guidance for future empirical work.
Subjects: 
wake-up call
information choice
financial crises
contagion
bankrun
global games
fundamental re-assessment
JEL: 
D83
F3
G01
G21
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5107-4
Document Type: 
Working Paper

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