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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, 189--197.

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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.
DepartmentsFaculty of Humanities & Social Sciences > Social & Policy Sciences
Faculty of Humanities & Social Sciences > Economics
RefereedYes
StatusPublished
ID Code10070

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