What is meaning of Contagion?

The Contagion effect refers to the spread of shocks in the economy or an economic crisis across the countries and boundaries. It usually spreads by price movements. Contagion may happen at the national or international levels. The effects have become more pronounced during the increased interdependence seen in this global era. Thus, any sharp price movements observed in one place are generally the result of shocks or volatility seen in other markets. However, on an international scale, many other factors of trade also serve to enhance the contagion effect across the geographies.