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Does asymmetric information play a role in explaining the Asian crisis? Application to Indonesian and Malaysian cases using a two-state Markov Switching model

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  • Emna Trabelsi

    (ISG - Institut Supérieur de Gestion de Tunis [Tunis] - Université de Tunis)

Abstract

This paper aims at establishing a relationship between disparity of information and the probability of speculative attack in explaining the Asian crisis. We apply the general framework of Markov-Switching models to the differential of interest rates (DIR), subsequently in Indonesia and Malaysia. We allow dependency of the transition probabilities over the asymmetric information indicators. The Maximum Likelihood estimators results (MLE) are twofold: (1) an increase of information dispersion among speculators leads to a higher probability of a currency crisis (2) there is a significant asymmetric impact of information disparity as measured by difference between fund price and Net Asset Value (NAV) on the transition probability in the case of Indonesia, while the hypothesis is rejected for Malaysia's case.

Suggested Citation

  • Emna Trabelsi, 2010. "Does asymmetric information play a role in explaining the Asian crisis? Application to Indonesian and Malaysian cases using a two-state Markov Switching model," Working Papers hal-00536311, HAL.
    • Handle: RePEc:hal:wpaper:hal-00536311
    Note: View the original document on HAL open archive server: https://hal.science/hal-00536311
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    References listed on IDEAS

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    1. Frankel, Jeffrey A & Schmukler, Sergio L, 2000. "Country Funds and Asymmetric Information," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 5(3), pages 177-195, July.
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    7. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
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    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • F3 - International Economics - - International Finance

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