IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/26785.html
   My bibliography  Save this paper

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

Author

Listed:
  • Trabelsi, Emna

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

  • Trabelsi, Emna, 2010. "Does asymmetric information play a role in explaining the Asian currency crisis? Application to Indonesian and Malaysian cases using a two-state Markov Switching model," MPRA Paper 26785, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26785
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/26785/1/MPRA_paper_26785.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
    2. Ratti, Ronald A. & Seo, Jeonghee, 2003. "Multiple equilibria and currency crisis: evidence for Korea," Journal of International Money and Finance, Elsevier, vol. 22(5), pages 681-696, October.
    3. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-597, June.
    4. 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.
    5. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    6. M. Sbracia & Alessandro Prati, 2002. "Currency Crises and Uncertainty About Fundamentals," IMF Working Papers 02/3, International Monetary Fund.
    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.
    8. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Speculative attack ; Global Games ; Asymmetric information ; Markov-Switching Models;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:26785. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.