Investigating contagion effect of the recent Turkey currency crisis

Narinder Pal Singh and Suzan Dsouza

International Journal of Monetary Economics and Finance, 2022, vol. 15, issue 2, 118-137

Abstract: This study empirically analyses the contagion effect of Turkey Lira crisis 2018 on the currencies of selected Asian (Indonesia, Malaysia, South Korea and India) and other six countries (Chile, Argentina, Mexico, Brazil, Russia and South Africa) using correlation and volatility analysis. The results of correlation analysis show that Turkey's lira bears a positive correlation with all the other select currencies in all the three periods; the whole period, the pre-crisis period and the post-crisis period. Almost all the correlation coefficients are significant at 1% or 5% level of significance across the crisis and have increased after the recent turkey lira crisis. From the results of volatility spillover analysis using exponential generalised autoregressive conditional heteroscedasticity (EGARCH) model, we infer that the Turkey currency crisis has affected the volatility of currencies of India, Brazil, Argentina % South Africa, and the effect being the least on the Indian rupee volatility while the maximum impact on the South African rand volatility.

Keywords: contagion; Turkey crisis; currency; correlation; volatility. (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:15:y:2022:i:2:p:118-137

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