Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/123767 
Year of Publication: 
2015
Series/Report no.: 
Bank of Canada Working Paper No. 2015-14
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We propose a novel theory of financial contagion. We study global coordination games of regime change in two regions with an initially uncertain correlation of regional fundamentals. A crisis in region 1 is a wake-up call to investors in region 2 that induces a reassessment of local fundamentals. Contagion after a wake-up call can occur even if investors learn that fundamentals are uncorrelated and common lender effects or balancesheet linkages are absent. Applicable to currency attacks, bank runs and debt crises, our theory of contagion is supported by existing evidence and generates a new testable implication for empirical work.
Subjects: 
Exchange rates
Financial stability
International financial markets
JEL: 
D82
F3
G01
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
456.14 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.