Currency crisis contagion: Expectations drive market chaos and economic instability.
Currency crises can spread due to expectations, even if the market seems stable on its own. By allowing speculators to trade in multiple currency markets, a devaluation in one market can lead to a crisis in another. This contagion effect is driven by speculators' beliefs and can increase the likelihood of a crisis. The model used in the study aligns with real-world evidence, showing how expectations can influence currency markets.