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Contagion
(redirected from contagions)

   Also found in: Dictionary/thesaurus, Medical, Wikipedia 0.04 sec.
Contagion
The likelihood of significant economic changes in one country spreading to other countries. This can refer to either economic booms or economic crises.

Notes:
An infamous example is the "Asian Contagion" that occurred in 1997 and started in Thailand. The economic crisis in Thailand spread to bordering southeast Asian countries and then eventually spilled over to Latin America.


Contagion
Excess correlation of delivering or bond returns. For example, under usual conditions we might observe a certain level of correlation of market returns. A period of contagion would be associated with much higher-than-expected correlation. Some examples are the conjectured contagion in East Asian markets beginning in July 1997 when the Thai currency devalued and the impact across many emerging markets of the Russian default. Contagion is difficult to identify because you need some sort of measure of the expected correlation. It is complicated because correlations are known to change through time, for example, see Erb, Harvey and Viskanta's article in the 1994 Financial Analysts Journal. In periods of negative returns, correlations (and volatility) are known to increase, so what might appear to be excessive may not be contagion.

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