Financial Market Contagion in the Asian Crisis

60 Pages Posted: 9 Dec 1998

See all articles by Ilan Goldfajn

Ilan Goldfajn

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

Date Written: November 1998

Abstract

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.

Keywords: WP, e.g Thailand-Philippines, Malaysia-Philippines case, Malaysia-Thailand equity, Korea regression, stock index, Contagion, Asian Crises, Financial Markets, interest rate correlation, Thai baht, Malaysia's spread, correlations counterpart, market mayhem, Stock markets, Currency markets, Exchange rates, Currencies, Stocks, Asia and Pacific, East Asia

JEL Classification: F30, F40, G15, G10, F31, E42, G23

Suggested Citation

Goldfajn, Ilan, Financial Market Contagion in the Asian Crisis (November 1998). Available at SSRN: https://ssrn.com/abstract=3923367 or http://dx.doi.org/10.2139/ssrn.3923367

Ilan Goldfajn

Gávea Investimentos ( email )

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Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

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Brazil

Central Bank of Brazil ( email )

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