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Financial Contagion in Five Small Open Economies: Does the Exchange Rate Regime Really Matter?[Note 1. We thank Benn Steil, Roger Nord and two anonymous ...]
Author(s) -
Darvas Zsolt,
Szapáry György
Publication year - 2000
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00041
Subject(s) - economics , spillover effect , exchange rate , monetary economics , small open economy , emerging markets , capital market , empirical evidence , capital flows , exchange rate regime , financial market , interest rate parity , interest rate , stock (firearms) , international economics , macroeconomics , market economy , finance , liberalization , mechanical engineering , philosophy , epistemology , engineering
This paper examines the spillover effects of the global financial crises of 1997–9 on five small open economies with different types of exchange rate regimes: the Czech Republic, Greece, Hungary, Israel and Poland. We found empirical evidence that the regional aspect played a dominant role in the intensity of the spillover effects. We found no empirical evidence that the pressures on exchange rates, interest rates and stock markets were primarily influenced by the exchange rate regime in place. Our findings do not support the commonly held view that flexible regimes are the best choice for small open emerging market economies exposed to volatile capital flows.