The Unholy Trinity of Financial Contagion

Graciela Kaminsky (), Carmen Reinhart and Carlos Vegh

No 10061, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over the last 20 years, some financial events, such as devaluations or defaults, have triggered an immediate adverse chain reaction in other countries -- which we call fast and furious contagion. Yet, on other occasions, similar events have failed to trigger any immediate international reaction. We argue that fast and furious contagion episodes are characterized by "the unholy trinity": (i) they follow a large surge in capital flows; (ii) they come as a surprise; and (iii) they involve a leveraged common creditor. In contrast, when similar events have elicited little international reaction, they were widely anticipated and took place at a time when capital flows had already subsided.

JEL-codes: F30 F31 (search for similar items in EconPapers)
Date: 2003-11
New Economics Papers: this item is included in nep-fin, nep-his and nep-ifn
Note: IFM
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Citations: View citations in EconPapers (343)

Published as Kaminsky, Graciela L., Carmen M. Reinhart and Carlos A. Vegh. "The Unholy Trinity Of Financial Contagion," Journal of Economic Perspectives, 2003, v17(4,Fall), 51-74.

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Related works:
Journal Article: The Unholy Trinity of Financial Contagion (2003)
Working Paper: The unholy trinity of financial contagion (2003)
Working Paper: Two Hundred Years of Contagion (2002)
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