Financial Market Contagion in the Asian Crisis
61 Pages Posted: 3 Mar 1999
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: Suggested Citation