Currency Crisis and Contagion: Evidence from Exchange Rates and Sectoral Stock Indices of the Philippines and Thailand

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.

[1]  Y. Shin,et al.  Generalized Impulse Response Analysis in Linear Multivariate Models , 1998 .

[2]  P. Krugman.  What Happened to Asia , 1999 .

[3]  Paul Krugman,et al.  A Model of Balance-of-Payments Crises , 1979 .

[4]  C. V. Rijckeghem,et al.  Sources of contagion: is it finance or trade? , 2001 .

[5]  I. Goldfajn,et al.  Financial Market Contagion in the Asian Crisis , 1998, IMF Staff Papers.

[6]  Kristin J. Forbes,et al.  The Asian Flu and Russian Virus : Firm-Level Evidence on How Crises are Transmitted Internationally * , 2002 .

[7]  Robert P. Flood,et al.  Perspectives on the Recent Currency Crisis Literature , 1998, SSRN Electronic Journal.

[8]  Jorge A. Chan-Lau,et al.  Financial Crisis and Credit Crunch as a Result of Inefficient Financial Intermediation--With Reference to the Asian Financial Crisis , 1998 .

[9]  Jun Nagayasu,et al.  Currency Crisis and Contagion : Evidence From Exchange Rates and Sectoral Stock Indices of the Philippines and Thailand , 2000 .

[10]  C. Granger.  Investigating Causal Relations by Econometric Models and Cross-Spectral Methods , 1969 .

[11]  R. Mckinnon,et al.  Credible Liberalizations and International Capital Flows: The "Overborrowing Syndrome" , 1996 .

[12]  Carmen M. Reinhart,et al.  On crises, contagion, and confusion , 2000 .

[13]  M. Obstfeld.  Models of Currency Crises with Self-Fulfilling Features , 1995 .

[14]  M. Hashem Pesaran,et al.  Working with Microfit 4.0 : interactive econometric analysis , 1997 .

[15]  Sergio L. Schmukler,et al.  What Triggers Market Jitters? A Chronicle of the Asian Crisis , 1999 .

[16]  Paul R. Masson,et al.  Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria , 1998 .

[17]  Carmen M. Reinhart,et al.  The Twin Crises: The Causes of Banking and Balance-of-Payments Problems , 1996 .

[18]  Graciela L. Kaminsky,et al.  The twin crises , 2001 .

[19]  Clive W. J. Granger,et al.  A Bivariate Causality between Stock Prices and Exchange Rates: Evidence from Recent Asia Flu , 1998 .

[20]  Robert J. Shiller,et al.  Cointegration and Tests of Present Value Models , 1987, Journal of Political Economy.

[21]  Robert P. Flood,et al.  Collapsing exchange-rate regimes: Some linear examples , 1984 .

[22]  Marcel Fratzscher.  Why are currency crises contagious? A comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998 , 1998 .

[23]  A. Saunders.  Credit Risk Measurement: New Approaches to Value at Risk and Other Paradigms , 1999 .