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Currency crisis and contagion: evidence from exchange rates and sectoral stock indices of the Philippines and Thailand

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  • Nagayasu, Jun

Abstract

This paper analyzes empirically the recent Asian financial crisis using high frequency data of exchange rates and stock indices of the Philippines and Thailand. Utilizing standard time-series techniques, this study confirms that there is evidence that developments in some sectoral indices—including those of banking and financial sectors—seem to have caused upward pressure on exchange rates. A correlation between some of these variables is also found to be strong across countries in the crisis period, thereby confirming the importance of the linkages between financial markets as a transmission channel of the Thai crisis to the Philippines.
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  • Nagayasu, Jun, 2001. "Currency crisis and contagion: evidence from exchange rates and sectoral stock indices of the Philippines and Thailand," Journal of Asian Economics, Elsevier, vol. 12(4), pages 529-546.
  • Handle: RePEc:eee:asieco:v:12:y:2001:i:4:p:529-546
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    1. W N W Azman-Saini & M S Habibullah & Siong Hook Law & A M Dayang-Affizzah, 2007. "Stock Prices, Exchange Rates and Causality in Malaysia: A Note," The IUP Journal of Financial Economics, IUP Publications, vol. 0(1), pages 7-13, March.
    2. D Brookfield & A Azizan, 2006. "Contagion and the Role of Market Development: the Case of the Malaysian Futures Market during the East Asian Crisis of 1997," Economic Issues Journal Articles, Economic Issues, vol. 11(2), pages 1-18, September.
    3. Tsai, Pei-Jung, 2009. "International equity flows and country funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 862-894, December.
    4. Kanokwan Chancharoenchai & Sel Diboog¬Lu & Ike Mathur, 2005. "Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(4), pages 38-56, August.
    5. Kanokwan Chancharoenchai & Sel Dibooglu, 2006. "Volatility Spillovers and Contagion During the Asian Crisis: Evidence from Six Southeast Asian Stock Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(2), pages 4-17, April.
    6. Mirzosharif JALOLOV & Tatsuyoshi MIYAKOSHI, 2005. "Who Drives The Russian Financial Markets?," The Developing Economies, Institute of Developing Economies, vol. 43(3), pages 374-395, September.
    7. Kanokwan Chancharoenchai & Sel Dibooglu, 2006. "Volatility Spillovers and Contagion During the Asian Crisis: Evidence from Six Southeast Asian Stock Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(2), pages 4-17, April.
    8. Lin, Anchor Y., 2006. "Has the Asian crisis changed the role of foreign investors in emerging equity markets: Taiwan's experience," International Review of Economics & Finance, Elsevier, vol. 15(3), pages 364-382.
    9. Woon Sau Leung & Nicholas Taylor, 2013. "Testing for contagion: the impact of US structured markets on international financial markets," Chapters,in: Handbook of Research Methods and Applications in Empirical Finance, chapter 11, pages 256-284 Edward Elgar Publishing.
    10. Chortareas, Georgios & Cipollini, Andrea & Eissa, Mohamed Abdelaziz, 2012. "Switching to floating exchange rates, devaluations, and stock returns in MENA countries," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 119-127.
    11. Kuan-Min Wang, 2013. "Did Vietnam stock market avoid the “contagion risk” from China and the U.S.? The contagion effect test with dynamic correlation coefficients," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(4), pages 2143-2161, June.
    12. Khalid, Ahmed M. & Kawai, Masahiro, 2003. "Was financial market contagion the source of economic crisis in Asia?: Evidence using a multivariate VAR model," Journal of Asian Economics, Elsevier, vol. 14(1), pages 131-156, February.
    13. Lin, Anchor Y. & Swanson, Peggy E., 2008. "U.S. investors and global equity markets," International Review of Financial Analysis, Elsevier, vol. 17(1), pages 83-107.
    14. Younes Boujelbène & Majdi Ksantini, 2009. "La transmission entre les marchés boursiers :Une analyse en composante principale," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 52(2), pages 161-194.
    15. Kan, Denis & Andreosso-O'Callaghan, B., 2007. "Examination of the efficient market hypothesis--the case of post-crisis Asia Pacific countries," Journal of Asian Economics, Elsevier, vol. 18(2), pages 294-313, April.
    16. Jirasakuldech, Benjamas & Emekter, Riza & Rao, Ramesh P., 2008. "Do Thai stock prices deviate from fundamental values?," Pacific-Basin Finance Journal, Elsevier, vol. 16(3), pages 298-315, June.
    17. Kanokwan Chancharoenchai & Sel Diboog¬Lu & Ike Mathur, 2005. "Stock Returns and the Macroeconomic Environment Prior to the Asian Crisis in Selected Southeast Asian Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(4), pages 38-56, August.
    18. Tsai, Pei-Jung, 2010. "Country funds and the role of international equity flows in pricing and in premiums and discounts," Global Finance Journal, Elsevier, vol. 21(1), pages 43-70.
    19. AuYong, Hue Hwa & Gan, Christopher & Treepongkaruna, Sirimon, 2004. "Cointegration and causality in the Asian and emerging foreign exchange markets: Evidence from the 1990s financial crises," International Review of Financial Analysis, Elsevier, vol. 13(4), pages 479-515.
    20. Lin, Anchor Y. & Swanson, Peggy E., 2004. "International equity flows and developing markets: the asian financial market crisis revisited," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(1), pages 55-73, February.
    21. Lestano, Lestano, 2015. "Asymmetric Exchange Rate Exposure in Indonesian Industry Sectors," MPRA Paper 64357, University Library of Munich, Germany.
    22. Cajueiro, Daniel O. & Tabak, Benjamin M., 2006. "Testing for rational bubbles in banking indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 366(C), pages 365-376.
    23. Stefan Eichler & Dominik Maltritz, 2011. "Stock Market‐Induced Currency Crises—A New Type of Twins," Review of Development Economics, Wiley Blackwell, vol. 15(2), pages 223-236, May.
    24. Lim, Kian-Ping & Brooks, Robert D. & Kim, Jae H., 2008. "Financial crisis and stock market efficiency: Empirical evidence from Asian countries," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 571-591, June.
    25. Tsai, Pei-Jung & Swanson, Peggy E. & Sarkar, Salil K., 2007. "Mean and volatility linkages for closed-end country funds," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(4), pages 550-575, September.

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