Use of Deviations of Purchasing Power Parity and Interest Rate Parity to Clarify the 1997 Asian Financial Crisis

Mao-Wei Hung and Yin-Ching Jan ()
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Mao-Wei Hung: Department of International Business, National Taiwan University, Taiwan, R.O.C.
Yin-Ching Jan: Department of Industrial Engineering and Management, National Chin-Yi Institute of Technology, Taiwan, R.O.C.

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2002, vol. 05, issue 02, 195-218

Abstract: This study is an attempt to examine whether the deviations of purchasing power parity and uncover interest rate parity Granger-cause the 1997 Asian financial crisis by using vector autoregression and Granger causality tests. The results show that the purchasing power parity and uncover interest rate parity do not hold for most Asian markets. We find weak evidence to support that the deviations of purchasing power parity and uncover interest rate parity have the power to explicate the origin of the financial crisis.

Keywords: Financial crisis; Granger causality; Interest rate parity; Purchasing power parity; Vector autoregression (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0219091502000754

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