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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/542

Title: Contagion phenomena in financial crises : evidence from the Portuguese and Spanish exchange rate crises in the early nineties
Authors: Abreu, Margarida
Keywords: Exchange rate crises
Financial contagion
Issue Date: 2003
Publisher: ISEG - Departamento de Economia
Citation: Abreu, Margarida. 2003. "Contagion phenomena in financial crises : evidence from the Portuguese and Spanish exchange rate crises in the early nineties". DE Working papers nº 5-2003/DE/CISEP
Series/Report no.: DE Working papers;nº 5/2003/DE/CISEP
Abstract: Based on the experience of the Portuguese and Spanish financial crises in the early nineties, this paper suggests that the spillover of exchange rate crises may reveal a particular dimension of the financial contagion effect: the presumption of mimetic behavior by monetary authorities. This paper analyses the evolution of the credibility of the escudo and the peseta. We set out to test the existence of a contagion effect, that is, in what way does the polarization of exchange rate expectations in a scenario of devaluation of one currency explain the building up of a similar scenario for the other currency. We also examine the transmission mechanisms of such a scenario. Our results suggest the existence of a one-way contagion effect, of the escudo by the peseta. Speculative attacks against the peseta necessarily give rise to speculative attacks against the escudo, regardless of the evolution of the “fundamentals” of the escudo. In this case, the spillover of financial crises could be better understood by the anticipated mimetic behavior of monetary authorities, rather than by the geographical proximity of the countries in question or by the identical performance of the economies of both.
URI: http://hdl.handle.net/10400.5/542
Appears in Collections:CISEP - Documentos de Trabalho / CISEP - Working Papers
DE - Documentos de trabalho / Working Papers

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