Contagion, Herding and Exchange-rate Instability – A Survey

Despite the considerable body of literature on the subject of currency crises there is still very little agreement on the true drivers of these crises and their transmission across countries. This article focuses in particular on the role of herd behaviour and fi nancial contagion, and the high exchange-rate volatility which is a direct consequence of these. It also looks at the adverse macroeconomic consequences of episodes with high exchange-rate volatility, especially in terms of labour market performance.

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