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Currency depreciation and Korean stock market performance during the Asian financial crisis

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  • Currency depreciation and Korean stock market performance during the Asian financial crisis
  • Fang, WenShwo; Miller, Stephen M.
  • University of Nevada, Las Vegas


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Title Currency depreciation and Korean stock market performance during the Asian financial crisis
Similar Titles
Material Type Reports
Author(English)

Fang, WenShwo; Miller, Stephen M.

Publisher

[Las Vegas, U.S.]:University of Nevada, Las Vegas

Date 2002-09
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Economy < Economic Administration
Holding University of Nevada, Las Vegas

Abstract

Structural shifts characterize the volatility of the Korean stock and foreign exchange markets during the 1997 Asian financial crisis. This paper employs an unrestricted bivariate GARCH-M model of stock market returns to investigate empirically the effects of daily currency depreciation on Korean stock market returns. The evidence shows that currency depreciation significantly affects stock market performance through three distinct channels: exchange rate depreciation adversely affects stock market returns, higher exchange rate depreciation volatility induces higher stock market returns, and exchange rate depreciation volatility raises stock market return volatility. The evidence suggests that small open stock markets are vulnerable to exchange rate movements.