Financial Contagion in Asia and Latin America (Report‪)‬

I. INTRODUCTION The Asian financial crisis that originated in Thailand in the summer of 1997, spread globally hitting Russia in the summer of 1998 and Brazil in November of 1999. The crisis was not confined to Asia and did spread into countries that had little interaction with each other. The currency crisis became global. There seems to be an emerging consensus that the crisis originated from speculative attacks on currencies and that these attacks are temporarily correlated at least in the short run. However, what triggered these speculative attacks gave rise to considerable debates among economists and policy planners. This paper considers and explains some of these debates. The paper is organized in the following manner. Section 2 provides a comprehensive survey of literature on currency crisis. Section 3 uses data on three countries in Latin America (Argentina, Brazil and Mexico) to show evidence of contagion; section 4 highlights the difference in currency crisis that erupted in Asia and Latin America, and section 5 summarizes the findings.