Financial Market Contagion in the Asian Crisis

61 Pages Posted: 3 Mar 1999  

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

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.

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: https://ssrn.com/abstract=142285 or http://dx.doi.org/10.2139/ssrn.142285

Taimur Baig (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
(202) 623-8790 (Phone)
(202) 244-4505 (Fax)

Ilan Goldfajn

Gávea Investimentos ( email )

Rua Dias Ferreira, 190 7th andar
22431-050 Rio de Janeiro
Brazil

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

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia DF 70074-900, Distr. Federal 70074-900
Brazil
61-4143232 (Phone)
61-2260767 (Fax)

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