Does International Financial Contagion Really Exist?



This article surveys the various definitions and taxonomies of international financial contagion in the academic literature and popular press and relates it to the existing evidence on co-movements in international asset prices, on the growth and volatility of international capital flows and on the relationship between flows and asset prices. The central argument of the article is that the empirical evidence is not as obviously consistent with the existence of market contagion as many researchers, the press, or market regulators believe. Policy implications of this alternative viewpoint are presented.