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trevino_contagion.pdf

🔗 Source: econweb.ucsd.edu

📊 Size: 386 KB

👤 Author: Isabel Trevino

⬇️ Downloads: 87

Summary

This study examines two main channels of financial contagion: a fundamental channel based on real and financial links between economies, and a social learning channel where agents base decisions on noisy observations of others' actions in foreign markets. Using a two-country model and experimental tests, the results show that subjects do not extract information optimally, leading to base-rate neglect and overreaction biases that affect these channels. Base-rate neglect weakens the fundamental channel, while overreaction bias strengthens the social learning channel, resulting in significant welfare effects. The study highlights the importance of differentiating between these channels for policy analysis and demonstrates the usefulness of laboratory experiments in investigating the role of social learning in financial contagion.

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Description

This study examines two main channels of financial contagion: a fundamental channel based on real and financial links between economies, and a social learning...

Technical Information

File Format: PDF
File Size: 386 KB
Pages: 39
Language: EN
Author: Isabel Trevino
Total Downloads: 87
Last Updated: 3 hours ago

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This PDF document about Here. provides comprehensive information and guidance. Whether you're a beginner or advanced user, this resource offers valuable insights into Here..