Finance
Financial Contagion
Definition
The spread of a financial crisis from one country or market to others, through trade links, investor sentiment, or shared vulnerabilities.
Explanation
The 1997 Asian Financial Crisis spread from Thailand to Indonesia, South Korea, and Malaysia in weeks. The 2008 crisis spread from US subprime mortgages to global banking. Contagion occurs through trade channels (one country's recession reduces demand for another's exports), financial channels (shared creditors pull money from all similar markets), and sentiment (investors flee all emerging markets regardless of fundamentals).