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Contagion is the spread of disease-causing organisms from one organism to another through direct contact or through the air. It is a fundamental concept in epidemiology, the study of disease spread.
What is financial contagion?
Financial contagion refers to the spread of financial instability or crisis from one market or country to others, often triggered by interconnected financial systems. It can lead to economic downturns in multiple regions due to the close ties between markets.
What is an example of financial contagion?
A key example of financial contagion is the 2008 global financial crisis. It started with the collapse of the housing market in the U.S., but soon spread to banks and economies worldwide, causing widespread economic downturns.
What is the contagion effect in banks?
The contagion effect in banks occurs when financial trouble in one bank or financial institution spreads to others, often due to their interconnected lending or investment activities. This can lead to a broader financial crisis affecting multiple banks.
What are the causes of financial contagion?
Financial contagion can be caused by various factors, including panic in financial markets, interdependencies between economies or financial institutions, and the rapid spread of negative investor sentiment.
What is bank run contagion?
Bank run contagion occurs when the failure of one bank leads to panic among depositors in other banks, causing them to withdraw their money, which can destabilize the banking system and lead to further bank failures.
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