{"id":1228,"date":"2022-04-14T17:36:44","date_gmt":"2022-04-14T15:36:44","guid":{"rendered":"https:\/\/www.christophbertsch.com\/?p=1228"},"modified":"2022-04-27T09:48:18","modified_gmt":"2022-04-27T07:48:18","slug":"forthcoming-in-the-review-of-finance-a-wake-up-call-theory-of-contagion","status":"publish","type":"post","link":"https:\/\/www.christophbertsch.com\/?p=1228","title":{"rendered":"Forthcoming in the Review of Finance: \u201cA Wake-Up Call Theory of Contagion\u201d"},"content":{"rendered":"\n<p><strong><a href=\"https:\/\/doi.org\/10.1093\/rof\/rfac025\" target=\"_blank\" rel=\"noreferrer noopener\">&#8220;A wake-up call theory or contagion&#8221;<\/a><\/strong> with <a rel=\"noreferrer noopener\" href=\"http:\/\/toniahnert.com\" target=\"_blank\">Toni Ahnert<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Abstract: We offer a theory of financial contagion based on the information choice of investors after observing a financial crisis elsewhere. We study global coordination games of regime change in two regions linked by an initially unobserved macro shock. A crisis in region 1 is a wake-up call to investors in region 2. It induces them to reassess the regional fundamental and acquire information about the macro shock. Contagion can occur even after investors learn that region 2 has no ex-post exposure to region 1. We explore normative and testable implications of the model. In particular, our results rationalize evidence about contagious currency crises and bank runs after wake-up calls and provide some guidance for future empirical work.&nbsp;(D83, F3, G01, G21)<\/li><\/ul>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2021\/12\/Figure2a_revised.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"352\" height=\"281\" src=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2021\/12\/Figure2a_revised.jpg\" alt=\"\" class=\"wp-image-1192\" srcset=\"https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2021\/12\/Figure2a_revised.jpg 352w, https:\/\/www.christophbertsch.com\/wp-content\/uploads\/2021\/12\/Figure2a_revised-300x239.jpg 300w\" sizes=\"auto, (max-width: 352px) 100vw, 352px\" \/><\/a><figcaption>The value of information v and the proportion of informed investors n2 with and without a wake-up call, f \u2208 {1, 0}. The figure shows (1) the strategic complementarity in information choices and (2) the intermediate range of information costs for which we establish information acquisition only after a wake-up call.<\/figcaption><\/figure><\/div>\n\n\n\n<ul class=\"wp-block-list\"><li>Keywords: wake-up call, information choice, financial crises, contagion, bank run, global games, regime change, fundamental re-assessment.<\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;A wake-up call theory or contagion&#8221; with Toni Ahnert Abstract: We offer a theory of financial contagion based on the information choice of investors after observing a financial crisis elsewhere. We study global coordination games of regime change in two &hellip; <a href=\"https:\/\/www.christophbertsch.com\/?p=1228\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[29,33,35,105,81],"class_list":["post-1228","post","type-post","status-publish","format-standard","hentry","category-academic-research","tag-contagion","tag-global-games","tag-information-choice","tag-international-finance","tag-systemic-risk"],"_links":{"self":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1228","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1228"}],"version-history":[{"count":4,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1228\/revisions"}],"predecessor-version":[{"id":1239,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=\/wp\/v2\/posts\/1228\/revisions\/1239"}],"wp:attachment":[{"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1228"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1228"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.christophbertsch.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1228"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}