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This paper presents a theoretical framework to highlight possible channels for the international transmission of financial shocks. We first review the different definitions and measures of contagion adopted by the literature. We then use a simple multi-country asset pricing model to classify the main elements of the current debate on contagion and provide a stylized account of how a crisis in one country can spread to the world economy. In particular, the model shows how crises can be transmitted across countries, without assuming ad hoc portfolio management rules or market imperfections. Finally, tracking our classification, we survey the results of the empirical literature on contagion.

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The purpose of the Economic History Working Papers (Quaderni di Storia economica) is to promote the circulation of preliminary versions of working papers on growth, finance, money, institutions prepared within the Bank of Italy or presented at Bank seminars by external speakers with the aim of stimulating comments and suggestions. The present series substitutes the Historical Research papers -Quaderni dell'Ufficio Ricerche Storiche. The views expressed in the articles are those of the authors and do not involve the responsibility of the Bank.

This paper studies empirically how uncertainty a¤ects speculation in the foreign exchange markets. We use the dispersion of survey forecasts of key macroeconomic variables to measure uncertainty about fundamentals. We …nd that uncertainty has a non-monotone e¤ect on exchange rate pressures: namely, uncertainty heightens speculative pressures when expected fundamentals are good and eases them when they are bad. We prove that this prediction arises from a broad class of currency crisis theories, ranging from …rst-generation to global-game models. We also show that the proposed empirical strategy remains valid in the presence of forecasters with strategic objectives and use a novel set of instrumental variables to address potential endogeneity bias.JEL Classi…cation: F31, D84, D82