Financial Market Contagion in the Asian Crisis

61 Pages Posted: 3 Mar 1999

See all articles by Taimur Baig

Taimur Baig

International Monetary Fund (IMF)

Ilan Goldfajn

Gávea Investimentos; Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Central Bank of Brazil

Date Written: October 1998


This paper tests for evidence of contagion between the financial markets of Thailand, Malaysia, Indonesia, Korea, and the Philippines. Cross-country correlations among currencies and sovereign spreads are found to increase significantly during the crisis period, whereas the equity market correlations offer mixed evidence. A set of dummy variables using daily news is constructed to capture the impact of own-country and cross-border news on the markets. After controlling for own-country news and other fundamentals, the paper shows evidence of cross-border contagion in the currency and equity markets.

JEL Classification: F30, F40, G15

Suggested Citation

Baig, Taimur and Goldfajn, Ilan, Financial Market Contagion in the Asian Crisis (October 1998). IMF Working Paper No. 98/155, Available at SSRN: or

Taimur Baig (Contact Author)

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Ilan Goldfajn

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