Holt, Richard

Snell, Andrew

Larios-Martinez, Heriberto

2006-10-18T11:09:16Z

2006-10-18T11:09:16Z

2006-11

Crises in emerging markets during the 1990’s pose a challenge to understand why economies with apparently strong fundamentals did face severe devaluations and severe disruption in their functioning. We study three different aspects of crises: i) Contagion is defined as the possibility of a domestic financial or currency crisis to spread to other countries. We study the 1990’s crises and introduce a new measure for defining financial crises and isolating their impact on currency crises and vice versa; ii) During the 1990’emerging countries in crises suffered severe adjustments in the level of consumption. We build on Lucas’s measure of welfare loss and derive a more comprehensive measure that includes: total loss; loss related to changes in consumption growth rate; to volatility of consumption; and, to changes in the level of consumption; iii) Trying to explain the behaviour of consumption after crises in emerging markets during the 1990’s we found contradicting theoretical approaches and empirical results. We solve the model of intertemporal maximisation of consumption assuming that agents maximise over several periods at a time. We extend the intertemporal framework to include the decision of participating not only in the loanable funds market but in other financial assets and derive the solution for a stock market. The results imply an alternative to the specification of the Euler equation for consumption with more explanatory variables previously omitted.

2309092 bytes

application/pdf

http://hdl.handle.net/1842/1454

en

The University of Edinburgh. Management School and Economics. Economics

Crisis

Currency crisis

Financial crisis

Contagion

Welfare

Intertemporal consumption

Financial and Currency Crises: Contagion and Welfare Costs in Emerging Markets

Thesis or Dissertation

Doctoral

PhD Doctor of Philosophy