Did the US macroeconomic conditions affect Asian stock markets?
AbstractThe aim of this paper is to examine the impact of US macroeconomic conditions—namely, exchange rate and short-term interest rate—on the stocks of seven Asian countries (China,India, the Philippines, Malaysia, Singapore, Thailand, and South Korea). Using daily data for the period 2000 to 2010, we divide the sample into pre-crisis period (pre-August 2007) and crisis period (post-August 2007) we find that in the short-run interest rate has a statistically insignificant effect on returns for all countries except the Philippines in the crisis period,while except for China, regardless of the crisis, depreciation had a statistically significant negative effect on returns. When the long-run relationship among the variables is considered,for four of the seven countries (India, Malaysia, Philippines, Singapore, and Thailand) while there was cointegration in the pre-crisis period, in the crisis period there was no such relationship, implying that the financial crisis has actually weakened the link between stock prices and economic fundamentals.
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Bibliographic InfoPaper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Financial Econometics Series with number 2011_13.
Date of creation: 21 Nov 2011
Date of revision:
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Interest Rate; Exchange Rate; Financial Crisis; Depreciation;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
- NEP-FMK-2011-12-19 (Financial Markets)
- NEP-MAC-2011-12-19 (Macroeconomics)
- NEP-SEA-2011-12-19 (South East Asia)
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