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International Trade Relations and the Contagious Effects of the Asian Financial Crisis

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  • Chunchi Wu

    (School of Management, Syracuse University, Syracuse, NY 13224, USA)

Abstract

This paper examines the trade relationship among Pacific Rim Asian economies and the U.S. with an attempt at understanding the fundamental causes for the contagious effects of the Asian financial crisis. East Asian economies trade extensively among themselves and with the U.S. This great dependence on foreign trade and investments has considerably increased the instability of the economies and financial markets in this region. It is found that the impact of the financial crisis on a domestic economy is positively correlated with its trade relationship with foreign economies. The importance of the trade relationship is manifested in the financial markets. Results show that the returns and volatility of a stock market are significantly influenced by the markets of its major trading partners. Also, foreign exchange markets often significantly interact with stock markets, especially following the Asian financial crisis. Furthermore, the Japanese and Hong Kong markets, instead of the U.S. market, had a dominating effect on East Asian financial markets during the period of the financial crisis.

Suggested Citation

  • Chunchi Wu, 2000. "International Trade Relations and the Contagious Effects of the Asian Financial Crisis," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 367-399.
    • Handle: RePEc:wsi:rpbfmp:v:03:y:2000:i:03:n:s0219091500000212
    DOI: 10.1142/S0219091500000212
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    Cited by:

    1. Lee, Ming-Chih & Chiu, Chien-Liang & Lee, Yen-Hsien, 2007. "Is twin behavior of Nikkei 225 index futures the same?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 377(1), pages 199-210.
    2. Saker Sabkha & Christian Peretti & Dorra Hmaied, 2019. "The Credit Default Swap market contagion during recent crises: international evidence," Review of Quantitative Finance and Accounting, Springer, vol. 53(1), pages 1-46, July.
    3. Lei Gao & Andrey Zagorchev, 2020. "Dual-Class Firms and Innovation after NAFTA," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-33, March.
    4. Nathan Lael Joseph & Thi Thuy Anh Vo & Asma Mobarek & Sabur Mollah, 2020. "Volatility and asymmetric dependence in Central and East European stock markets," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1241-1303, November.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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