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Stock prices as a leading indicator of the East Asian financial crisis


Reference:

Broome, S. and Morley, B., 2004. Stock prices as a leading indicator of the East Asian financial crisis. Journal of Asian Economics, 15 (1), pp. 189-197.

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    Official URL:

    http://dx.doi.org/10.1016/j.asieco.2003.12.008

    Abstract

    Using a basic monetary model, we assess the effectiveness of stock prices as a leading indicator of the East Asian currency crisis in 1997 and 1998. Stock prices are incorporated into a monetary model, through the wealth effect postulated by Friedman [J. Pol. Econ. 96 (1988) 221]. In addition to the domestic stock price, we also incorporate the stock prices of Hong Kong, China and Japan. Using monthly data, the results indicate that the domestic stock price, the Hong Kong stock price and particularly US prices are significant leading indicators of the crisis. Causality tests suggest evidence of bi-causality between the stock markets and foreign exchange markets.

    Details

    Item Type Articles
    CreatorsBroome, S.and Morley, B.
    DOI10.1016/j.asieco.2003.12.008
    DepartmentsFaculty of Humanities & Social Sciences > Social & Policy Sciences
    Faculty of Humanities & Social Sciences > Economics
    RefereedYes
    StatusPublished
    ID Code10070

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