The East Asian economic crisis and the sudden default of Russian government debt in August 1998 exemplify the critical importance of understanding how international capital flows impact economic stability. In particular, the efficiency gains from the globalization of financial markets have not come without a price: regional shocks are now more readily propagated throughout the global financial system. Any risk management system must now incorporate the potential contagion, and the limits of country-specific regulatory safeguards must be recognized and buttressed. In this project, we examine the historical record of global financial crises to attempt to identify trends and tendencies - how serious is this problem, and are there any methods that can provide insights into the nature and degree of linkages among international financial institutions?
© 2008 MIT Sloan