CONTAGION EFFECTS

( Types & Causes )

Members CONTAGION Refers to the spread of Clinton Dsouza market disturbances Sagar Mishra EFFECTS Contagion isChicharito Dennis the likelihood
ofPinto significant economic changes. Sourabh Parab

Meaning Group

( Types & Causes ) Shahrukh Shaik

Shahrukh Sayyed

Strikes across firms or to either economic industriesthe spread of booms Refers to or The spreadcrises. economic of wage market disturbances increases secured by labor unions to non-union Contagion is the likelihood sectors. of significant economic The spread of business changes. fluctuations across economies. The spread of speculative trading across individuals.

Introduction This can refer Meaning

Introduction Types of Definition Strikes across firms or The Contagion adverse consequences

industries to Masson, According actions that of onespread of wage firm's The Contagion may be classified can spread throughout increases secured by labor intoindustry in which it the 2 categories: unions to non-union Spillovers operates. sectors. The spread of business Pure contagion fluctuations across economies. The spread of speculative trading across individuals.

links.. Accordingcrises formground to Masson, where a direct in a of link is The most Contagion may trade. zero country spills over through bilateral be classified into 2deterioration of into categories: Spillovers markets this link For emerging in other fundamentals is not very significant. countries. Pure contagion

Spillovers Types of Spillovers through trade Contagion It refers to the situation

Spillovers through Spillovers Pure Contagion financial market through trade Pure contagion refers to those linkages by a crises crises triggered links.. It is an important sources of elsewhere but which of link is The most direct formcannot be spillovers at least for bank explained by changes in through bilateral trade. lending. fundamentals or any sort of Losses in 1 country can lead mechanical markets For emerging spillovers this link banks to sell off assetsare other discussed significant. in is not very above, but countries. possibly caused by shifts in Lack of liquidity is or changes market sentiments another reason why a crises in 1to in interpretation given market may leadinformation. existing financial intermediaries to liquidate other emerging market assets.

Pure Contagion Causes of

Pure contagion refers to those Contagion crises triggered by a crises The causes of contagion be elsewhere but which cannot can be divided changes in explained by conceptually into 2 categories: fundamentals or any sort of mechanical spillovers The First Categorydiscussed above, but are Emphasizes spillovers possibly caused by shifts in market sentiments or changes The Second Categoryin interpretation given to Involves a Financial existing information. Crises

Involves of Emphasizes Causes a Financial Risk spillovers Contagion

that is notcontagion can be It is that result from to The causes of linkedthe observed changes in into 2 normal interdependence divided conceptually macroeconomics or other among market economies. categories: fundamentals. The First Category- Emphasizes Contagion arises when a cospillovers movement occurs. This interdependence means A crises in 1 countryof a lead that shocks, whether Involves The Second Category-may investors to withdraw theirbe global or local nature, can a Financial Crises investments from many transmitted across countries markets in other countries. because of their real & financial linkages.

Involves a Financial Risk

that is not linked to observed changes in macroeconomics or other fundamentals. Contagion arises when a comovement occurs. A crises in 1 country may lead investors to withdraw their investments from many markets in other countries.