Broom, S. and Morley, B. (2003) Stock Prices as a leading Indicatator of the East Asian Financial Crisis. UNSPECIFIED. (Unpublished)

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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. JEL. F30, E44

Item Type:	Other
Additional Information:	N131/11/03
Keywords:	Currency Crisis, Stock Prices, Monetary Model.
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	129
Depositing User:	Ms Sandra Doherty
Date Deposited:	11 Mar 2004
Refereed:	No
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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