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High-Frequency Contagion of Currency Crises in Asia

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  • Takatoshi Ito
  • Yuko Hashimoto

Abstract

Using daily data from the Asian currency crisis, the present paper examines high-frequency contagion effects among six Asian countries. The 'origin' (of exchange rate depreciation, or decline in stock prices) and the 'affected' (currencies, or stock prices) in the daily spillover relationship were defined and identified. Indonesia is found to be the main origin country, affecting exchange rates of other countries. Contrary to conventional wisdom, evidence of high-frequency crisis spillover from the Thai exchange rate to other currencies was weak at best. There exists a high-frequency contagion in stock markets among East Asian countries. Contagion coefficients are positively correlated with trade indices, indicating that investors lower their financial assessment of a country that has trade linkage to a crisis origin country within days, if not hours, of a shock. Copyright 2005 East Asian Economic Association.

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Article provided by East Asian Economic Association in its journal Asian Economic Journal.

Volume (Year): 19 (2005)
Issue (Month): 4 (December)
Pages: 357-381

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Handle: RePEc:bla:asiaec:v:19:y:2005:i:4:p:357-381

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  1. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis? Part I: A Macroeconomic Overview," NBER Working Papers 6833, National Bureau of Economic Research, Inc.
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Cited by:
  1. Jan P. A. M. Lestano, 2007. "Dating currency crises with ad hoc and extreme value-based thresholds: East Asia 1970-2002 [Dating currency crises]," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(4), pages 371-388.
  2. Hsien-Yi LEE, 2011. "Contagion in International Stock Markets During the sub Prime Mortgage Crisis," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 8, pages 141-158, December.
  3. Haidar, Jamal Ibrahim, 2012. "Currency crisis transmission through international trade," Economic Modelling, Elsevier, vol. 29(2), pages 151-157.
  4. Pavlova, Anna & Rigobon, Roberto, 2005. "Wealth Transfers, Contagion and Portfolio Constraints," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5117, C.E.P.R. Discussion Papers.
  5. Hsien-Yi Lee, 2012. "Contagion in International Stock Markets during the Sub Prime Mortgage Crisis," International Journal of Economics and Financial Issues, Econjournals, vol. 2(1), pages 41-53.
  6. Jacobs, Jan P.A.M. & Kuper, Gerard H. & Lestano, 2005. "Currency crises in Asia: a multivariate logit approach," CCSO Working Papers, University of Groningen, CCSO Centre for Economic Research 200506, University of Groningen, CCSO Centre for Economic Research.
  7. Lee, Hsien-Yi & Wu, Hsing-Chi & Wang, Yung-Jang, 2007. "Contagion effect in financial markets after the South-East Asia Tsunami," Research in International Business and Finance, Elsevier, Elsevier, vol. 21(2), pages 281-296, June.
  8. Lestano & Jacobs, Jan P.A.M., 2004. "A comparison of currency crisis dating methods: East Asia 1970-2002," CCSO Working Papers, University of Groningen, CCSO Centre for Economic Research 200412, University of Groningen, CCSO Centre for Economic Research.

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