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Regional vulnerability: the case of East Asia

By Ashoka Mody and Mark P. Taylor

Abstract

In a case study of six East Asian economies, we use dynamic factor analysis to estimate a regional component of the exchange market pressure index (EMPI) as a measure of regional financial stress. The extent to which this indicator is explained by regional economic and financial factors is interpreted as regional vulnerability to crisis. We find that regional external liabilities and exuberance in domestic stock and credit markets, as well as the US high yield spread, were positively correlated with regional vulnerability. Individual country EMPIs are also explained by regional factors, with country-specific factors and trade linkages playing little role

Topics: HG
Publisher: University of Warwick, Department of Economics
Year: 2006
OAI identifier: oai:wrap.warwick.ac.uk:1423

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