How Far Will Argentina's Tempest Blow?

A Predata index suggests it's not time to panic yet.

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Foul winds have been whipping through emerging markets. After the Turkish lira plunged last month triggering falls in European markets, the collapse of the Argentine peso has unleashed signs of panic. Emerging market stock indices have fallen for several days straight. In announcing desperate austerity measures in a bid to regain investor confidence, President Mauricio Macri told his country that it faced an emergency. The question now is contagion. Will Argentina's collapse spark a full-blown crisis in developing world markets?

The Predata Emerging Market Crisis Index captures the salience of that concern in the digital realm. The Index is built on the hypothesis that if investors and market observers believed a widespread crisis was likely, then web traffic would increase on pages related to past emerging market contagion events, such as the Asian financial crisis in 1997 and the subsequent Russian ruble crisis. As the chart shows, however, activity on such pages is remarkably low.

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The fall in the Turkish lira last month triggered a spike in the Index. But the storm in Argentina has not sparked a similar reaction. At least for now.