Stock Prices as a leading indicator of the East Asian Financial Crisis

Simon J. Broome () and Bruce Morley
Additional contact information
Simon J. Broome: Economics, National University of Ireland, Maynooth

Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth

Abstract: Using a basic currency crisis 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 basic monetary model, through the wealth effect postulated by Friedman (1988). In addition to the domestic stock price, we also incorporate the stock prices of Hong Kong, China and Japan to determine their ability to predict the crisis. Using monthly data, the results indicate that the domestic stock price is a significant leading indicator, however the main stock prices indicator of the crisis is the Hong Kong stock price. In addition the US price level is also a highly significant predictor of the crisis. Causality tests suggest evidence of bi-causality between the stock markets and foreign exchange markets.

Keywords: Currency Crisis; Stock Prices; Monetary Model. (search for similar items in EconPapers)
JEL-codes: E44 F30 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.maynoothuniversity.ie/mayecw-files/N1311103.pdf (application/pdf)

Related works:
Journal Article: Stock prices as a leading indicator of the East Asian financial crisis (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:may:mayecw:n1311103

Access Statistics for this paper

More papers in Economics Department Working Paper Series from Department of Economics, National University of Ireland - Maynooth Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).