Contagion risk: Financial shocks can spread globally, causing systemic crises.
This article explores how financial shocks can spread across global markets through contagion, which can be fueled by changes in investors' risk appetite. The researchers developed a new method to study contagion and analyzed data from various financial crises over the past decade in both mature and emerging markets. The findings suggest that contagion can play a significant role in causing widespread financial crises around the world.