This is true both of individual variables and of a host of macroeconomic factors taken simultaneously. These results hold up with respect to a number of perturbations to the basic empirical methodology. The hypothesis of no significant trade channel for contagion seems wildly inconsistent with the data, while macroeconomic conditions do not explain the cross-country incidence of currency crises. That is, currency crises seem to spread contagiously because of international trade patterns. We have found strong evidence that currency crises tend to spread along the regional lines suggested by international trade.
Countries tend to suffer speculative attacks after their foreign competitors are attacked.
This is true of five waves of speculative attacks since 1971. Accounting for a variety of different macroeconomic effects does not change this result. Indeed, macroeconomic factors do not consistently help much in explaining the cross-country incidence of speculative attacks. This externality has important implications for policy. If speculative attacks spread through trade links, then enhanced international monitoring on a regional basis is desirable.