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The Asian crisis and the process of financial contagion

Franklin Allen (Nippon Life Professor of Finance and Economics at the Wharton School.)
Douglas Gale (Department of Economics, New York University, New York)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 1 March 1999

498

Abstract

Economists have believed for a long time that financial systems are fragile in the sense that small shocks can cause serious disruption. Research has focused on phenomena, such as bank runs, which affect the stability of individual institutions. Only recently has there been interest in the phenomenon of contagion, in which financial distress in one institution or one sector of the financial system spreads to other institutions or sectors. The crises in South‐East Asia in 1997 and Russia in 1998 have provoked speculation that financial crises have spread from one country to another. This paper reviews a number of possible hypotheses about the process of financial contagion and relates them to recent events in emerging markets.

Citation

Allen, F. and Gale, D. (1999), "The Asian crisis and the process of financial contagion", Journal of Financial Regulation and Compliance, Vol. 7 No. 3, pp. 243-249. https://doi.org/10.1108/eb025012

Publisher

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MCB UP Ltd

Copyright © 1999, MCB UP Limited

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