DOES INTERNATIONAL FINANCIAL CONTAGION REALLY EXIST?

In the 1990s, exchange rate crises followed stock market crashes and sharp economic contractions, with devastating effects on countries around the world. The frequency and extent of these events led many policymakers, regulators, journalists, and market participants to declare a "crisis of global capitalism" and to call for a new "international financial architecture." When financial crises occur in neighboring countries in rapid succession, it is tempting to believe that financial distress is capable of spreading like a contagious disease. Moreover, it is logical to look for potential carriers of such a disease among market participants such as commercial banks, international mutual funds, and global investors. 2004 Morgan Stanley.