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High‐Frequency Contagion of Currency Crises in Asia *
Author(s) -
Ito Takatoshi,
Hashimoto Yuko
Publication year - 2005
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/j.1467-8381.2005.00217.x
Subject(s) - spillover effect , economics , monetary economics , exchange rate , depreciation (economics) , currency , currency crisis , stock (firearms) , financial contagion , shock (circulatory) , contagion effect , financial crisis , international economics , macroeconomics , geography , medicine , capital formation , archaeology , financial capital , economic growth , human capital
Using daily data from the Asian currency crisis, the present paper examines high‐frequency contagion effects among six Asian countries. The ‘origin’ (of exchange rate depreciation, or decline in stock prices) and the ‘affected’ (currencies, or stock prices) in the daily spillover relationship were defined and identified. Indonesia is found to be the main origin country, affecting exchange rates of other countries. Contrary to conventional wisdom, evidence of high‐frequency crisis spillover from the Thai exchange rate to other currencies was weak at best. There exists a high‐frequency contagion in stock markets among East Asian countries. Contagion coefficients are positively correlated with trade indices, indicating that investors lower their financial assessment of a country that has trade linkage to a crisis origin country within days, if not hours, of a shock.