Contagion: macroeconomic models with multiple equilibria

Several concepts of contagion are distinguished. It is argued that models that allow only a single equilibrium conditional on the macroeconomic fundamentals are not adequate to capture all forms of contagion, hence it is useful to formulate macro models that admit multiple equilibria and self-fulfilling expectations. A simple balance of payments model is presented to illustrate that phenomenon, and some back-of-the-envelope calculations assess its relevance to the coincidence of emerging market crises in 1994–95 and in 1997.  1999 Elsevier Science Ltd. All rights reserved. JEL classification: F3; F4