Correlation dynamics in East Asian financial markets

We examine the dynamic relationship between stock returns and exchange rate changes using daily data from January 1994 to September 2013 for six East Asian countries. We use the multivariate GARCH-DCC model in order to disclose the relationship between stock markets and foreign exchange markets which is important for understanding financial stability. The estimation results reveal time varying correlations in the pre and post Asian crisis and the Global Financial Crisis periods for all countries. The correlations are stronger when the crisis intensifies. The degree of interdependence between both markets reflects a mutually markets response to shocks and changes in policy

Correlation Dynamics in East Asian Financial Markets

This paper examines the dynamic relationship between stock returns and exchange rate changes using daily data from January 3, 1994 - September 27, 2013 for six East Asian countries: Indonesia, Malaysia, the Philippines, Singapore, South Korea and Thailand. We estimate conditional correlations using the multivariate GARCH-DCC model in order to disclose the relationship between stock markets and foreign exchange markets. This is important for understanding financial stability. The estimation results reveal time varying correlations in the pre and post Asian crisis and the Global Financial Crisis periods for all countries. The correlations are stronger when the crisis intensies. The degree of interdependence between both markets reflects a mutually markets response to shocks and changes in policy

The determinants of vulnerability to currency crises: country-specific factors versus regional factors

We investigate the determinants of exchange market pressures (EMP) for some new EU member states at both the national and regional levels, where macroeconomic and financial variables are considered as potential sources. The regional common factors are extracted from these variables by using dynamic factor analysis. The linear empirical analysis, in general, highlights the importance of country-specific factors to defend themselves against vulnerability in their external sectors. Yet, given a significant impact of the common component in credit on EMP, a contagion effect is apparent through the conduit of credit market integration across these countries under investigation