Sources of financial contagion in the Asian and 2008 Financial Crises

Abstract

The purpose of this research was to identify the factors which cause financial contagion and the relationship between them. Furthermore, this research was to study the impact of irrational investor behavior on further spread of financial crisis. This research objective was achieved through the research tool of case study. Multiple case studies were conducted on financial crisis of 1997 and 2008 respectively. Through the descriptive case study on two different financial crises, the researcher was able to find out the common factors of financial contagion which led to the spread of financial crisis and was also able to establish the role of irrational investor behavior in further worsening of the crisis. The case study approach, though was able to identify common factors causing financial contagion, was however unable to establish any significant relationship between the factors of financial contagion. Therefore, further in-depth and quantitative studies are recommended to study the relationship between factors causing market contagion.