The impacts of Asian financial crisis on the movement among stock prices and exchange rates of Taiwan and ASEAN Countries

Abstract

This study traces the influence of the 1997 AFC by comparing the two periods of pre and post 1997 AFC for the dynamic relationships among stock markets and exchange rate markets, respectively, of Taiwan and five ASEAN countries -?? Indonesia, Thailand, Malaysia, Philippine and Singapore. The methodologies employed in this study include multivariate maximum likelihood cointegration test by Johansen (1988, 1992, and 1994) and vector autoregressive analysis for the long run and short run dynamic relationships for variables investigated. The evidence is that AFC is a key factor, which affects the dynamic co-movement among both the stock markets and foreign exchange markets of five ASEAN countries together with Taiwan. The long run relationship among stock markets was weakened due to the AFC, whereas, no long run equilibrium relationship exists among foreign exchange markets for both the pre and post AFC periods. For the short run dynamic relationship, the AFC drives the stock markets to be less interactive and the foreign exchange markets to be more stronger related.