Asian Currency Crisis Research Articles

The Vulnerability of a Small, Open Economy in A Situation of Global Fiscal Crisis: The Impact of the Greek Debt Crisis on the Foreign Direct Investments to Macedonia

The objective of my research is to critique the International Monetary Fund (IMF) stance on foreign investment and the benefits for small, open economies of allowing the free movement of capital. In my research as a whole I will explore the extent to which this stance impacted upon and influenced the economic policies of Macedonia. This will involve providing a contextualized, critical account of the policy of the IMF focusing on a comparison of its policies during the early 2000s through policy documents, political discourse and enacted policies in Macedonia. The conditionality associated with these policies, such as the enforcement of austerity measures (including cutting public spending and reducing debt) and the privatization of public institutions has provoked strong reactions in countries which receive such loans (Goldstein et al., 2003; Feldstein, 1998). Moreover, the main aim of the policies and the lack of in-depth analysis on the levels of development of the economies involved has had devastating outcomes in the past (such as with the East Asian currency crisis [1997/8], Latin American – Argentinian crisis [2001], Ex-Soviet Union crisis [1998], Eurozone crisis [2007/8]) (Lal, 1987; Goldstein et al., 2003; Joyce, 2003). My focus in this research is on exploring how the process of Financial Liberalization (FL) of the Macedonian economy affected capital flows in the form of foreign direct investments (FDI) in the private sector and how the recent Greek crisis of 2008 has impacted on this. According to Barnett and Monastiriotis, the neighboring countries (Albania, Bulgaria, Macedonia and Serbia) in which Greece is either the first or the second largest direct investor, are ‘most vulnerable to negative spillover through reduced FDI flows’ as Greek-owned FDI accounts for 7-9% of the GDP of those countries (2010: 47). In the case of Macedonia, the reality of FL was tested by the collapse of the Greek economy. The first part of my research will critically evaluate simplified models used in previous research to explain the influence of crisis on FDI in small economies like Macedonia. I will argue that investigating the impact of FL is much more complex and cannot be explained by linear regression. Instead, by undertaking an in-depth documentary analysis of official reports and documents, I will seek to investigate how the official view of the benefits of FL impacted on the Macedonian economy, thus implicitly testing the accepted IMF position.

Thirty‐year assessment of Asian Development Bank's forecasts

This study assesses the performance of the forecasts of the Asian Development Bank (ADB) for 45 countries between 1989 and 2019 with the following results: first, forecast accuracy and bias vary among countries and across variables; second, the Asian currency and global financial crises adversely affected the GDP and inflation forecast accuracy, whereas there were no such impacts on the current account forecast accuracy; third, the ADB's forecasts are broadly unbiased; fourth, inflation forecasts are efficient but the GDP and current account forecasts are not; finally, unbiasedness is broadly robust for the countries' regions. These results suggest that the ADB plays a grounding economic role in providing a reliable economic outlook for policymakers and businesses world wide.

중･고령자의 주된 일 퇴직과 재취업 동학 분석 : 1997년 외환위기와 연공 효과를 중심으로

중･고령자의 주된 일 퇴직과 재취업 동학 분석 : 1997년 외환위기와 연공 효과를 중심으로

Is the Korean housing market following Gangnam style?

Gangnam is a prime district in Korea known for its expensive real estate market due to convenient transportation, shopping and business centers, and elite schools and academies in the area. This paper examines spillovers and network connectedness in the Korean regional markets using the spillover index of Diebold and Yilmaz (J Econom 182:119–134, 2014). We use the quantile regression approach to investigate the macroeconomic factors driving the total spillover effects under low, normal, and high spillovers. We find that the 1997–1998 Asian currency crisis intensified regional spillovers in the Korean housing market. Moreover, Gangnam is the largest transmitter of spillovers across the regional housing markets in Korea. Our visual network illustrates that Gangnam is a hub of connectedness, implying that it is the most influential shock transmitter among the regional housing markets. Our study has an implication for investors: macroeconomic factors affect spillovers across regional housing sales and rental markets under different degrees of spillover.

The Effects of R&D Expenditure and Technological Spillover on Industry Revenues in Japan

This research analyzes the effects of research and development (R&D) activities on industries' sales based on accounting information for the Japanese manufacturing sector from 2001–2017, with the aim of accurately grasping the current situation. The analytical model is based on the traditional extended Cobb-Douglas production function. By avoiding the statistical problem of endogeneity and serial correlation, a multiple regression analysis was used to understand the statistical superiority of the effects of R&D expenditure and technological spillovers on sales figures. This study also analyzes the relationship between acceptance and supply of technological spillovers in Japanese industries to understand the current state of the impact of technological spillovers. In conclusion, the effects of recent R&D activities in the Japanese manufacturing sector are low. After the 1997 Asian Currency Crisis, Japan's economic growth has declined; this study could help improve R&D activities that support economic growth in this poor growth climate.

Financial Fragility, Regime Switching and Monetary Policy - With Application to Emerging Markets

The experience of the Asian currency and financial crisis in the years 1997-8 encouraged economists to develop some open economy nonlinear macro models. Such models allow for nonlinearities – studying the effects of contractionary currency devaluation in contrast to the standard model of expansionary currency devaluation. One in particular can distinguish here between slow and fast moving risk premia and exchange rates. As shown currency depreciation and slow moving exchange rates and risk premia may render the economy expansionary whereas fast moving exchange rates (fast depreciation) and fast increase in risk premia may generate macroeconomic instability and contractions. This is of course impacted by monetary policy that recently has moved from conventional (interest setting) to unconventional (asset purchasing) policies. The latter was in particular aiming at asset prices and risk premia, namely to bring risk premia of private assets (stocks and bonds) down and reduce credit spread for private and public bond yields. By doing this central banks are de-risking assets to stimulate aggregate demand (Caballero et al. 2020). But the latter policy has produced also international tensions due to spillover and volatility effects to other countries. In a generic nonlinear dynamic model of the finance-macro link we include the dynamics of the inflation rates, output gap and financial variable such as credit flows, risk premia and exchange rates. In the empirical part of the paper we examine then the interaction between the real and financial sectors of emerging market economies in particular post the financial crisis 2008-9. Though the dynamic model is operating with both the output gap and credit gap in our empirical analysis we work with the output gap only, since credit flows are hard to obtain for the large number of EM countries we study. Looking at a two-regime output gap and some financial indicators – such as risk premia, banking beta, and exchange rates – we then adopt the non-linear logistic vector smooth transition autoregressive (LVSTAR) approach of Schleer and Semmler (2015) with a logistic type transition function governing the LVSTAR system. Our study reveals that financial indicators of emerging economies show different responses to external shocks. With a positive shock in risk premia, the exchange rate depreciations occur in most emerging economies, and more so if the country faces a negative output gap.

Analyzing exchange rate uncertainty and bilateral export growth in China: A multivariate GARCH-based approach

Dramatic changes to exchange rate policy for the world's largest exporter have arguably ushered in the optimal environment for studying the effects of exchange rate uncertainty on trade. This study builds on the recent literature by using an extremely general model that measures volatility using the flexible multivariate DCC-GARCH model to analyze the impact exchange rate uncertainty has on bilateral export growth for China's ten largest export markets. All model parameters are estimated simultaneously and lagged values of uncertainty are included for a full year, where significant effects are found. The more general methods potentially overcome issues associated with inefficient two-step methods and the assumption that volatility impacts are close to instantaneous. Using a comprehensive sample that spans 1994–2017, the paper presents evidence that exchange rate uncertainty has no impact on trade with the United States, which strongly contrasts a robust finding of trade deterring impacts for almost all remaining countries. The unifying methodology is also used to analyze nominal uncertainty itself. Here, it is found that Chinese inflation may be a positive contributor to risk in an environment where many exogenous events, such as the Asian currency crisis, are associated with periods of heightened yuan uncertainty.

The Analysis of Government Intervention and Stock Market during Crises Periods

The government, through central banks, has a monetary authority to do an intervention, either directly or indirectly. Central banks do a direct intervention by exchanging reserves to influence the exchange rate and do an indirect intervention by increasing or decreasing the interest rate. However, when the currency crises happen, smoothing the currency movements by doing government intervention may reduce fears in the financial markets. This study examines the government intervention effect in 27 countries on the stock market during the crises periods, either during the Asian currency crises or currency crises of each country. To estimate abnormal returns, this study uses the traditional market model. Then, in the lack of official government intervention data, this study uses the proxy of government intervention to estimate the intervention activities. This study shows that in currency crises periods, the government interventions do not effectively impact exchange rate, stock price, and stock market return.

Estimation and Forecasting of Sovereign Credit Rating Migration Based on Regime Switching Markov Chain

Our research aims to develop the regime switching Markov chain (RSMC), a discrete time Markov chain whose underlying regime is depending on a hidden Markov model, which express the dynamics of sovereign credit rating migration. Estimated based on a version of the Expectation-Maximization algorithm, the regime in RSMC indicates either economic expansion or contraction. Then, we apply RSMC to the monthly time series of the sovereign credit rating of 41 nations from January 1994 to December 2018. At first, we confirm that the estimation of RSMC is superior to a homogeneous Markov chain. It implies that the credit rating dynamics are subject to the underlying economic condition. Secondly, we observe that the second tier and non-investment credit ratings in economic contractions are likely to be downgraded. We also detect the continental clustering of economic contractions for the Asian currency and European sovereign debt crises. Lastly, we discover that the forecasting performance of RSMC is superior to that of the benchmark, especially for the second tier and non-investment credit ratings. In conclusion, we claim that RSMC can improve the management of sovereign credit risk exposures.

Measuring the Time-Frequency Dynamics of Return and Volatility Connectedness in Global Crude Oil Markets

This study analyzes return and volatility spillovers across global crude oil markets for 1 January 1991 to 27 April 2018, using an empirical technique from the time and frequency domains, and makes four key contributions. First, the spillover tables reveal that the West Texas Intermediate (WTI) futures market, which is a common indicator of crude oil indices, contributes the least to both return and volatility spillovers. Second, the results also show that the long-term factor contributes the most to returns spillover, while the short-term factor contributes the most in terms of volatility. Third, the rolling analyses show that the time-variate connectedness in terms of returns tends to be strong, but there was no noticeable change from 1991 to April 2018 in terms of volatility. Finally, the major events between 1991 and April 2018, namely the Asian currency crisis (1997–1998) and the global financial crisis (2007–2008), caused a rise in the total connectedness of returns and volatility.

Volatility spillovers among the U.S. and Asian stock markets: A comparison between the periods of Asian currency crisis and subprime credit crisis

This paper examines the changing nature of volatility spillovers among the U.S. and eight East Asian stock markets between two financial crises: the Asian currency crisis and the U.S. subprime credit crisis. Our empirical results suggest that volatility is not always spilled over from the directly affected markets to surrounding markets in crisis periods. The East Asian markets who directly suffered from the Asian currency crisis are the ones to which volatility is spilled over from other markets during the Asian currency crisis period, whereas uni-directional volatility spillovers from the U.S. market to other markets are observed during both crisis periods. This difference can be explained by a pre-determined hierarchy in which volatility spillovers tend to start from the U.S. market regardless of the geographical origin of the crisis. Furthermore, our results reveal that the markets in three major Asian financial hubs, i.e., Japan, Hong Kong and Singapore, are the markets to which volatility is spilled over uni-directionally from several other countries during the subprime credit crisis period, but not during the Asian currency crisis period. We attribute this difference to crisis-specific (currency or credit crisis), market-specific (credit derivatives market participation and foreign currency reserves), and time-specific (more integrated global market) factors.

Fractal market hypothesis: evidence for nine Asian forex markets

In this study , an attempt is made to test the Fractal Markets Hypothesis (FMH) which states that a financial market can plunge into crisis when a particular trading time horizon gains prominence over others. We apply a wavelet-based method to capture the activities in different timescales. We test the proposition for nine Asian forex markets of China, India, Hongkong, Japan, South Korea, Singapore, Sri Lanka, Taiwan, and Thailand for the period from 05-01-1994 to 30-06-2017. We use bilateral daily exchange rate of the corresponding currencies against the US Dollar. The time period covers two major crises and they are the 1997–1998 East Asian currency crisis and the 2008 global financial crisis. The study captures both the events, and from the wavelet spectra, it is evident that the crisis period distinguishes itself with increased activity by the short-term traders as proposed by the FMH. It is also found that the 1997–1998 crises affected not only the East Asian markets, but also the other forex markets as well.

The Foreign Exchange System in Korea: A Literature Survey

The foreign exchange system of a country refers to the laws, regulations, and institutions that govern foreign exchange transactions between residents and non-residents and determine movement of exchange rates. The foreign exchange system in Korea has gone through a lot of changes in a relatively short time period. This paper presents a summary of the major changes in the foreign system in Korea together with a review of the academic literature on the foreign exchange system in Korea. In particular, the paper addresses four aspects about the foreign exchange system in Korea: the exchange rate regime, the capital account liberalization, the Asian currency crisis and the policy response, and the global financial crisis and the foreign exchange macro-prudential regulations.

Does international-reserves targeting decrease the vulnerability to capital flights?

Numerous episodes of financial turmoil such as the 1997–1998 East Asian currency crisis have shown that economies are more vulnerable to currency runs if their currency reserves are low and have not been targeted by central bank policies. These issues have recently become again relevant as a significant capital flight could be observed with respect to China's currency by the beginning of 2016, which however did not develop to a full fledged currency crisis due to the availability of large currency reserves by the Central Bank of China. Against this background, we study the design of optimal monetary policy rules in a theoretical framework where foreign investors react in a nonlinear manner to the evolution of the central bank's currency reserves. We show that by allowing the central bank to give some significantly positive weight to the level of precautionary foreign reserves as one of its targets, a currency crisis scenario can be avoided, while such a crisis is likely to occur when this weight is zero or sufficiently low. The effects of the central bank's monetary control on the output, the inflation rate, and the foreign reserve level corroborate the economy's vulnerability for insufficient foreign reserves targeting. By means of numerical simulations, we show that the larger the relative weight of the foreign reserves target in the central bank's loss function, the larger is the domain of attraction of the stable equilibrium where the economy is not vulnerable to capital flight shocks.

The Impact of the 'Hanson' Effect and the Asian Currency Crisis on Education Exports

Statements by Pauline Hanson about Asian immigration have not affected enrolments of Asian students in Australian educational institutions. Indeed, enrolments grew from 1996 to 1997. In contrast, the Asian currency crisis has reduced enrolments, especially in short-term language courses. Enrolments in higher education are much less affected. Copyright. Monash University and the author/s

Are Korean Industry-Sorted Portfolios Mean Reverting?

This paper tests the weak-form efficient market hypothesis for Korean industry-sorted portfolios. Based on a panel variance ratio approach, we find significant mean reversion of stock returns over long horizons in the pre Asian currency crisis period but little evidence in the post-crisis period. Our empirical findings are consistent with the fact that Korea accelerated its integration with international financial market by implementing extensive capital liberalization since the crisis.

Masuhara Ayako. The End of Personal Rule in Indonesia: Golkar and the Transformation of the Suharto Regime

The End of Personal Rule in Indonesia: Golkar and the Transformation of the Suharto RegimeMasuhara AyakoKyoto: Kyoto University Press; Melbourne: Trans Pacific Press, 2015, xviii+286p.In the revised version of her doctoral dissertation, Ayako Masuhara offers a fine-grained analysis of the collapse of President Suharto's New Order (1965-98). The author brings out the paradox that despite Suharto enjoying political patronage from the ruling Golkar party, the party made a 180-degree turn, a measure backed by the parliament and the fragmented reformist forces that compelled the President to resign. In a succinctly written introduction, Masuhara states her argument by throwing down a gauntlet before those political analysts who characterize the Suharto as a sultanistic regime (Aspinall 2005). Instead, she argues that the New Order was a co-opting-style personal in which the Golkar party accommodated political opponents (pp. 3, 15).Chapter 1 contextualizes the New Order within the broader context of Indonesian and area studies. She categorizes personal rule into four types based on the level of state surveillance and violence within the broader framework of comparative politics with examples from different countries: (i) isolated type, (ii) terrorizing type, (iii) dividing type, and (iv) co-opting type. Masuhara conceptualizes the Golkar party as a political space where vast number of Indonesian social elites competed against each other, paving the way for the rise of soft-liners within the New Order that eventually undermined the authority of Suharto. Chapter 2 comprehensively describes how the Suharto regime, as an example of a co-opting type of personal rule, ran the country based on political and economic patronage and violent oppression whereas Chapters 3, 4, and 5 collectively describe how the Golkar established and structured itself as the ruling party during the New Order. In Chapter 6, Masuhara argues that the more Golkar became independent from the Indonesian Armed Forces, the more heavily it had to depend on Suharto, and this reliance eroded the autonomy of the party by the late 1980s. In Chapter 7, Masuhara observes that due to the preference accorded to Suharto's children in the allocation of political posts within the Golkar, former student activists and Islamic group members within the party were sidelined, leading to a rift within the Suharto regime. Furthermore, the Asian Currency Crisis that began in July 1998 and led to the depreciation of the rupiah only served to expose the differences between the Minister of Finance Mar'ie Muhammad and the President (pp. 190-191).The conclusion contains one substantial claim by Masuhara that the Suharto concluded in a packed transition, that refers to multilateral negotiation between the political elites from the authoritarian and the democratic opposition that leads to a compromise (p. …

CD Index, A New Methods for Measure Banking Crisis

The global financial crisis ha s a bad impact for domestic financial systems. Banking system is important component from financials system which has more attention. Evidence from Indonesia crisis in 1998 from Asian currency crises, subprime mort gage America in 2008, the Vo latil ity of US Economic in 2011, and slowdown china economic in 2015 that made systematic risk for financial systems and banking system in Indonesia. Crisis identification for individual bank is important to avoid systematic risk. Using Index for measuring banking crisis will give crisis signal before the crisis happen. Crisis and Default Index can predict and measure banking crisis more accurate than other measurement. The four components of banking risk crisis have been included. These component s are liquidity risk, Credit risk, interest rate risk, and exchange rate risk. Fu rthermore, CD Index can describe duration of the crisis, periods of the crisis, and the component which can trigger a crisis. Samples of this research are all commercial banks that listed in Indonesian stock exchange period 2010-2014. The result is 18 banks which join Indonesian stock exchange have i ndicated crisis in 2011 and 2014. In 2010 BTN was identified Crisis, it caused the score of credit risk and investment risk is riskier than the others. Danamon bank has a bad score from credit component, it can trigger crisis in 2011. Then in 2012 and 2013 Sinarmas bank and J trust bank have been declared crisis. J trust bank was still in crisis in 2014, because it had a bad score for the all components.

Hedging Characteristics of Commodity Investment in the Emerging Markets

Investors derive the greatest risk reduction benefit from portfolio diversification by holding assets with a low co-movement. As correlations between stocks worldwide have been increasing over time, interest in alternative assets such as commodities is also rising. This study examines the risk reducing properties of commodity investment from the perspective of 10 emerging markets from January 1991 through December 2013. Tests of GARCH dynamic conditional correlation coefficients indicate that commodities are portfolio diversifiers, but do not provide a significant long-term hedge. In times of extreme stock market volatility commodities provide a weak safe haven against risk in most countries. During the 1994-95 Mexican peso crisis, the 1997-98 Asian currency crisis, and the 9/11/01 attack, commodities demonstrate significant safe haven properties. However, commodities do not offer significant risk reduction in the 2008 global financial crisis and the 2010 European debt crisis.

Malaysia's commodity export performance during Asian currency crisis and US subprime mortgage crisis

This paper highlights the impact of the 1997–1998 Asian currency crisis and the 2008–2009 US global financial crisis on Malaysia's exports. By using a quantitative approach, the findings pinpoint the types of Malaysia's exports that were severely hit during these crises. The results of this study show that the Asian financial crisis did not affect Malaysia's exports as badly as the global economic recession did. The novelty of this paper lies in using detailed information on Malaysia's commodity exports based on SITC (Revisions 3 and 4) during the two crises. The practical utility of this study is that it offers policymakers an insight into the vulnerable types of exports during crises so that they would be able to make good strategic decisions to protect the performance of export sectors in the event of future crises.