High‐Frequency Contagion of Currency Crises in Asia*

Using daily data from the Asian currency crisis, the present paper examines high‐frequency contagion effects among six Asian countries. The ‘origin’ (of exchange rate depreciation, or decline in stock prices) and the ‘affected’ (currencies, or stock prices) in the daily spillover relationship were defined and identified. Indonesia is found to be the main origin country, affecting exchange rates of other countries. Contrary to conventional wisdom, evidence of high‐frequency crisis spillover from the Thai exchange rate to other currencies was weak at best. There exists a high‐frequency contagion in stock markets among East Asian countries. Contagion coefficients are positively correlated with trade indices, indicating that investors lower their financial assessment of a country that has trade linkage to a crisis origin country within days, if not hours, of a shock.     

Yen carry trades and stock returns in target currency countries

The proliferation of carry trade – a strategy of simultaneously shorting a low-yielding currency and longing a high-yielding currency raises the concern on its impact on global asset prices. In this exercise, we examine the implications of yen carry trade for stock markets in a few selected target currency countries. Three alternative proxies for carry trade activity – a currency-specific profit measure, a currency-specific futures position variable, and the Deutsche Bank G10 Currency Futures Harvest Index – are used. It is found that the three measures of carry trade display various degrees of influences on stock returns in Australia, Canada, Britain, Mexico, and New Zealand. The empirical carry trade effect is robust to the inclusion of three control variables; namely the US stock return, the VIX Index that represents market volatility, and commodity prices. Further, the estimation results suggest that the three measures of carry trade share some common information about stock returns in target currency countries.     

Housing markets and the economy: the assessment

Housing markets have multiple interactions with the rest ofthe economy and these are surveyed in this paper. The driversof house prices include income, the housing stock, demography,credit availability, interest rates, and lagged appreciation,the latter a potential mechanism for overshooting. There israther less agreement on the determinants of new construction,though planning constraints are widely seen as a major issueand one of the causes of the UK housing affordability problem.The paper argues that housing collateral and downpayment constraintsare the key to understanding the role of house-price variationsin explaining medium-term consumption fluctuations. Institutionalvariations between countries and over time account for majordifferences in linkages between house prices and economic activity.This illuminates debates about how monetary and other policyshould react to house-price variations. The paper also discussesthe role of housing markets in explaining regional migrationand location decisions, intergenerational inequality, and restrictingaccess of the less affluent to public goods, such as good schools,which are capitalized in local house prices.     

Effect of COVID-19 lockdowns on city-center and suburban housing markets: Evidence from Hangzhou,China

In 2020, governments worldwide enforced lockdowns to contain the spread of COVID-19, severely impeding aspects of daily life such as work, school, and tourism. Consequently, numerous economic activities were affected. Before the COVID-19 outbreak, city-center housing markets in areas surrounding popular tourist attractions performed better than did suburban housing markets because of the output of the tourism industry. This study examines the changes in the performance of city-center and suburban housing markets in regions with popular tourist attractions after the lockdown. Specifically, the dynamics of city-center and suburban housing markets in Hangzhou, where West Lake is located, and the changes in the information transfer between these housing markets after the lockdown are explored. Transaction data from January 1, 2019 to September 30, 2020 are used to perform analysis, in which adjusted housing prices and asking prices are employed to measure market performance and sellers’ pricing strategies, and transaction volume and time on the market are used to measure market liquidity and transaction frequency. The results reveal that the effects of lockdowns differ between city-center and suburban housing markets. After the lockdown, a substantial structural change is observed in the suburban housing market; the volatility risk of housing prices decreases substantially, causing an increase in transaction premiums. Housing prices and transaction volume increase in the city-center housing market after the lockdown; this is possibly because of the influence from the overall housing market booms. In addition, because sellers raise their asking prices and the transaction time is extended, the sellers in the city-center housing market are particularly influenced by the disposition effect. This leads to a reversal in the lead–lag relationship between the city center and suburban housing markets in terms of informativeness. Specifically, before the lockdown, the city-center market transfers information to the suburban market, but after the lockdown, the suburban market transfers information to the city-center market. The COVID-19 pandemic has changed the world in many aspects; this paper finds that it will also change the development pattern of the real estate market in different locations.     

A Norwegian fixation: explaining cheap money in Norway, 1945–1986

In a number of European countries, credit markets were characterised by heavy regulations of quantities and prices, in terms of interest rates, in the post war years. In Norway, the regulations became more vigorous and lasted much longer, than most other countries. This article seeks to explain the extent and persistence of the policy by tracing the role of leading economists, of financial sector, and political considerations in relation to growths policies and the housing markets. Whereas a number of factors are highlighted in the emergence of the system, the role of political considerations in relation to cheap funding for the housing sector appears as a fundamental cause and condition in explaining the persistence of the cheap money policies into the mid-1980s.     

Monetary Union, institutions and financial market integration: Italy, 1862–1905

Years into the single currency, EMU financial markets are not fully integrated. We argue that the phenomenon can be better understood by looking at financial markets’ behavior in the wake of Italy’s monetary unification (1862). Variables such as the spread of the telegraph, trade volumes, and the diffusion of the ‘single currency’ fail to explain why it took 25 years for prices across regional stock exchanges to converge. A single Italian financial market appeared only when the State prevailed upon local vested interests by enforcing nation-wide financial market legislation.     

Do exchange rate arrangements and capital controls influence international capital flows and housing prices in Asia?

This paper investigates the influence of international capital flows on housing prices in eight Asian countries, including China. We focus on determining whether exchange rate arrangements and capital regulations influence capital inflows and housing prices. Our results show that an arrangement to restrain the fluctuation of the exchange rate and capital controls has the potential to raise housing prices in Asia. The strong prospect of the Chinese yuan's appreciation also pushed up housing prices in China. Another expected reason for the increase in capital inflows into Asian markets is the expansion of global liquidity. Such capital flows often have a sensitive reaction to market sentiment, and an increase in asset market volatility caused by the liquidity squeeze decreases Asian housing prices. These results suggest the need to review capital controls and future exchange rate system options for Asian countries.     

Estimating time-varying currency betas with contagion: New evidence from developed and emerging financial markets

This paper examines the conditional time-varying currency betas from five developed and six emerging financial markets with contagion and spillover effects. We employ a trivariate asymmetric BEKK-type GARCH-in-Mean (MGARCH-M) approach to estimate the time-varying conditional variance and covariance of returns of stock market index, the world market portfolio and bilateral exchange rate between the US dollar and the local currency. The results show that the world market and currency risks are not only priced in the stock markets, but also time-varying. It is found that currency betas are much more volatile than the world market betas, and currency betas in the emerging markets are more volatile than those in the developed markets. We find empirical evidence of contagion effect and spillovers between stock market and foreign exchange market during the recent global financial crisis, and the effect is stronger in the emerging markets than that in the developed markets. Two applications are provided to illustrate the usefulness of time-varying currency betas.     

International linkages of the Japanese stock market

Using daily open-to-close and close-to-open stock prices, this paper examines whether there are any lead–lag relationships between the Tokyo Stock Exchange and the other G7 stock markets. In particular, this paper analyzes whether the movements of other markets in the preceding trading session can be used to formulate profitable strategies to trade in Nikkei.     

The situation in currency markets in the CIS countries in 2009

The situation with currency markets in the CIS countries in 2009 was characterized by considerable fluctuations in national currencies against the background of the major problems in the financial sector, economic recession in most countries, slowing inflation in the consumer market, and deflation in prices of manufactured goods.     

美国量化宽松政策对新兴经济体股票市场价格的影响

2008年金融危机后美国采取量化宽松货币政策造成大量流动性进入新兴经济体股票市场。通过建立面板VAR模型,运用脉冲响应函数和方差分解技术分析了美国货币供应M1、股票市场以及联邦基金利率透过汇率、利率和预期方式对新兴经济体股票市场价格指数产生的影响。结果表明,美国量化宽松货币政策对新兴经济体股票市场价格具有正向溢出效应,利率渠道影响效果显著。     

Pricing to market at firm level

This paper analyzes the influence of exchange rate variations on prices in foreign and home markets using firm data. The theoretical benchmark, based on the literature of pricing to market, also takes into account some hypotheses about the effects of demand variations and market power on prices. The empirical analysis for the Spanish economy points out the positive impact of the devaluations of the domestic currency on the relative evolution of prices, though smaller than obtained in previous evidence using aggregated data. The results also suggest a procyclical behavior of prices, which is positively affected by the degree of competition. JEL no. F12, L60, L13 This research has been partially funded by the projects SEC2003-00516, and SEC2000-0723     

Measuring Pricing to Market in the Eurozone: The Case of the Automobile Industry

In this paper we measure the pricing to market for the main export products in the Eurozone automobile industry. Results reveal that significant markup adjustments exist following exchange rate variations. In general, these adjustments allow a strong stabilization of prices in buyer's currency terms. Nevertheless, the degree of pricing to market is quite heterogeneous and differs highly across both product categories and destination markets.     

The Interactions of Stock Prices and Exchange Rates in the ASEAN-5 Countries: New Evidence Using a Bootstrap Panel Granger Causality Approach

Abstract

Using a data-set from the ASEAN-5 countries over the January 2000–August 2013 period, this paper revisits the Granger causal nexus between the equity and foreign exchange markets by employing the bootstrap panel Granger causality approach developed by Kònya, which allows for both cross-sectional dependency and heterogeneity across countries. The results indicate a unidirectional causality from stock prices to exchange rates in Malaysia, the Philippines and Thailand and from exchange rates to stock prices in Indonesia. These findings have important implications for policy-makers and institutional investors who should rigidly monitor the dynamic linkages between stock price and exchange rate movements across the ASEAN-5 financial markets when making policy decisions and investing in these countries.     

Contagion in the stock markets: The Asian financial crisis revisited

This paper presents empirical evidence of herding contagion in the stock markets during the 1997 Asian financial crisis, above and beyond macroeconomic fundamental driven co-movements. We analyze the cross-country time-varying correlation coefficients among the stock prices for the countries of Thailand, Malaysia, Indonesia, Korea, and the Philippines, between crisis and tranquil periods. Macromodels are constructed and implemented to capture the pure contagion effects on the markets. After controlling for the economic fundamentals for the five countries, the paper finds strong evidence of herding contagion.     

基于金融周期视角下股票市场的联动效应研究

世界经济全球化已成为趋势,发达经济体的股市之间以及发达经济体与新兴经济体股市之间的联动性也在经济全球化的趋势中更加紧密。各国金融领域以及金融市场间的快速融合,不断形成统一规范的金融行为准则,也使得全球金融周期性特征越来越明显。文章选取世界五个主要股票市场指数为研究对象,按照已有研究对全球金融周期的划分,将该样本区间分成了繁荣期、衰退期和正常期三个阶段,然后基于这三个阶段分析了在不同金融周期五国股票市场指数收益率联动效应。基于实证研究结论,认为美国和欧洲股市联动性较强,与亚洲股市联动性相对较弱,且美国和中国股市之间联动性最弱,基本捕捉不到下尾相关。相关实证结论有利于国际投资者的投资组合管理,也有助于各国股票市场的风险规避。     

Global Financial Crises and Time‐Varying Volatility Comovement in World Equity Markets

This paper studies volatility comovement in world equity markets between 1994 and 2008. Global volatility factors are extracted from a panel of monthly volatility proxies relating to 25 developed and 20 emerging stock markets. A dynamic factor model (FM) is estimated using two‐year rolling‐window regressions. The FM's time‐varying variance shares of global factors map variations in volatility comovement over time and across countries. The results indicate that global volatility linkages are significantly stronger during financial crisis periods in Asia (1997‐1998), Brazil (1999), Russia (1998) and the United States (2000, 2007‐2008). Emerging markets are weakly synchronised with world volatility in comparison with developed markets. In particular, emerging market comovement is significantly lower than developed market comovement during the Asian and US sub‐prime crises. This suggests a degree of decoupling of emerging markets from the global drivers of volatility during these periods.     

Equity,Bonds, Institutional Debt and Economic Growth: Evidence from South Africa

We examine the finance‐growth nexus in South Africa accounting for the role of bond markets, stock markets, and bank and non‐bank financial intermediaries using a vector autoregressive technique. Extant empirical literature has largely accounted for only banks and stock markets, ignoring bond market and non‐bank financial intermediaries. We find that bond market development affects economic growth in South Africa, and no similar effect is observed for the bank and non‐bank financial intermediaries and the stock market. Our finding shows that examination of individual elements of the financial system is important in understanding the unique effect of each on growth. The observation that the bond market rather than stock market, bank and non‐bank institutions promote economic growth in South Africa induces an intriguing question as to what unique roles bond markets play that the intermediaries and equity market are unable to play.     

Bank credit and seasonal anomalies in China's stock markets

In this paper, we uncover seasonal anomalies in the Chinese A-share stock markets and examine to what extent they can be explained by bank credit. For the Shanghai and Shenzhen A-share markets over the 1993–2003 period with both monthly and quarterly data, we reject three series of priors: (i) Changes in regulation and investor behavior lead us to expect substantial alterations in the pattern of stock prices, especially in the late 1990s. However, the use of unobserved-components models enables us to uncover no evidence for changes in seasonal patterns over time, once outliers and structural breaks have been properly accounted for. An unchanging positive June effect and a negative December effect have been at work since 1993. (ii) We expect differences between the behavior of prices in Shenzhen and Shanghai, both at the level of the index and in their attractiveness for investors. We find evidence of very similar movements in seasonality between the two markets whatever the frequency. (iii) Seasonality in returns is often considered to be generated by the unofficial channeling of bank credit to the stock market. We find that seasonal effects in returns are robust to the inclusion of bank credit.     

我国股票市场对国际股票市场的敏感性——基于股票市场开放、股权分置改革和次贷危机的研究

20世纪90年代以来,随着经济全球化和金融一体化的发展,我国经济与外部经济的联系日益紧密,股票市场逐步开放,国内股票市场对国际市场的敏感性引起学者和业界的关注。本文综合考虑股票市场开放进程、股权分置改革和次贷危机引发的金融动荡,对我国股票市场对国际市场的敏感性进行分析,并提出相应的政策建议,以期对未来股票市场国际化有所裨益。