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Has 1997 Asian Crisis Increased Information Flows Between International Markets?

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  • Francisco J. Climent
  • Vicente Meneu

Abstract

The Asian crisis started on July 2, 1997 and caused turmoil in developed as well as emerging international stock markets. The objective of this paper is to analyse the movements and dynamic relationships among stock markets, together with their implications for information flows. We use the Morgan Stanley National and International Indexes (MSCI). These indexes refer to four geographic areas (Asia, Europe, North America and Latin America) for two homogeneous and non-overlapping time intervals. The econometric techniques used in this paper include the cointegration test, vector autoregression analysis, forecast error variance decomposition and impulse-response relationships. Our results show that: i) there are no multivariate cointegration relationships across markets, ii) the leadership role played by the U.S. became stronger after the crisis, iii) the response of Asian markets to external markets is more relevant than vice versa, especially after the crisis, iv) the degree of integration, in Phylaktis (1999) sense, between Asian and the rest of the international stock markets has increased after the crisis and, finally, v) the contagion effect determines significantly the dynamic relationships between international stock markets.

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Paper provided by FEDEA in its series Working Papers on International Economics and Finance with number 01-01.

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Handle: RePEc:fda:fdadef:01-01

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Cited by:
  1. Wang, Xue & Yao, Lee J. & Fang, Victor, 2013. "Stock prices and the location of trade: Evidence from China-backed ADRs," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 677-688.
  2. Ibrahim, Boulis Maher & Brzeszczynski, Janusz, 2009. "Inter-regional and region-specific transmission of international stock market returns: The role of foreign information," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(2), pages 322-343, March.
  3. Gebka, Bartosz & Serwa, Dobromil, 2006. "Are financial spillovers stable across regimes?: Evidence from the 1997 Asian crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 16(4), pages 301-317, October.
  4. Serwa, Dobromil & Bohl, Martin T., 2005. "Financial contagion vulnerability and resistance: A comparison of European stock markets," Economic Systems, Elsevier, Elsevier, vol. 29(3), pages 344-362, September.
  5. Kittiakarasakun, Jullavut & Tse, Yiuman, 2011. "Modeling the fat tails in Asian stock markets," International Review of Economics & Finance, Elsevier, Elsevier, vol. 20(3), pages 430-440, June.
  6. Gebka, Bartosz, 2006. "Leaders and Laggards: International Evidence on Spillovers in Returns, Variance, and Trading Volume," Working Paper Series, European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe 2006,1, European University Viadrina Frankfurt (Oder), The Postgraduate Research Programme Capital Markets and Finance in the Enlarged Europe.
  7. Bialkowski, Jedrzej & Bohl, Martin T. & Serwa, Dobromil, 2006. "Testing for financial spillovers in calm and turbulent periods," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 46(3), pages 397-412, July.
  8. Lucey, Brian M. & Voronkova, Svitlana, 2008. "Russian equity market linkages before and after the 1998 crisis: Evidence from stochastic and regime-switching cointegration tests," Journal of International Money and Finance, Elsevier, Elsevier, vol. 27(8), pages 1303-1324, December.
  9. Sensoy, Ahmet, 2013. "Dynamic relationship between precious metals," Resources Policy, Elsevier, Elsevier, vol. 38(4), pages 504-511.
  10. Lin, Chien-Hsiu, 2012. "The comovement between exchange rates and stock prices in the Asian emerging markets," International Review of Economics & Finance, Elsevier, Elsevier, vol. 22(1), pages 161-172.

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