This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Crosscountry correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. A set of dummy variables using daily news is constructed to capture the impact of own-country and cross-border news on the markets. After controlling for own-country news and other fundamentals, the paper shows evidence of cross-border contagion in the currency and equity markets.
This paper assesses the challenges faced by the inflation-targeting regime in Brazil. The inflation-targeting framework has played a critical role in macroeconomic stabilization. We stress two important challenges: construction of credibility and exchange rate volatility. The estimations indicate the following results: (i) the inflation targets have worked as an important coordinator of expectations; (ii) the Central Bank has reacted strongly to inflation expectations; (iii) there has been a reduction in the degree of inflation persistence; and (iv) the exchange rate pass-through for ''administered or monitored'' prices is two times higher than for ''market'' prices. #
This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Cross-country correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. A set of dummy variables using daily news is constructed to capture the impact of own-country and cross-border news on the markets. After controlling for own-country news and other fundamentals, the paper shows evidence of cross-border contagion in the currency and equity markets.
It is not speed that kills, it is the sudden stop. Bankers' adage THE COLLAPSE of the Mexican peso in late 1994 remains a topic of controversy. To some observers it appeared that the bungling of a new administration had brought about a disaster where there was no problem and every reason to expect stability and prosperity. In fact, some even argue that the damage could be undone by raising the peso to its initial level. The notion that the devaluation was a blunder or worse was shared by the Wall Street Journal's editorial board, some members of the U.S. Congress, and other advocates of hard money, including exposed investors. In the Financial Times Jude Wanniski referred to "currency devaluationists," and "currency debauchery" at the hands of Lawrence Summers and Stanley Fischer. ' To others, the ultimate collapse seemed inevitable and the only issue was one of timing. In this view currency alignment-devaluation or floating-was long overdue and had it been accomplished earlier, much We are indebted to our discussants on the Brookings Panel, and to Stanley Fischer and Robert Barro, for helpful comments and suggestions. 1. On raising the peso, see David Malpass, "
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