Institutional Investors,Trade Linkage,Macroeconomic Similarities,and Contagion of the Thai Crisis

This paper empirically investigates the presence of contagion effects and their causes in the 1997 Southeast Asian crisis. Our empirical results indicate that the Thai crisis was transmitted to neighboring Southeast Asian countries through contagion. They also suggest that the international investors' institutional practice of securing sufficient liquidity and trade linkage were important in spreading the contagion, but the financial integration channel was not important. In addition, the similar macroeconomic conditions of the Southeast Asian countries, such as large capital inflows, large accumulation of current account deficit, and high level of external debt prior to the onset of the Thai crisis, were also responsible for the contagion. J. Japan. Int. Econ., June 2001, 15(2), pp. 199–224. Department of Ecnomics, Korea University, 5-1 Anam-dong, Songbuk-ku, Seoul 136-701, Republic of Korea; and School of Economics, Kookmin University, 861-1 Chongnung-dong, Songbuk-ku, Seoul 136-702, Republic of Korea. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: F30, F31.