Regional vulnerability: The case of East Asia

Ashoka Mody; Mark P. Taylor

doi:10.1016/j.jimonfin.2007.06.012

Regional vulnerability: The case of East Asia

Ashoka Mody, Mark P. Taylor

Research output: Contribution to journal › Article › peer-review

14 Scopus citations

Abstract

In a case study of six East Asian economies, we use dynamic factor analysis to estimate a regional component of the exchange market pressure index (EMPI) as a measure of regional financial stress. The extent to which this indicator is explained by regional economic and financial factors is interpreted as regional vulnerability to crisis. We find that regional external liabilities and exuberance in domestic stock and credit markets, as well as the US high-yield spread, were positively correlated with regional vulnerability. Individual country EMPIs are also explained by regional factors, with country-specific factors and trade linkages playing little role.

Original language	English (US)
Pages (from-to)	1292-1310
Number of pages	19
Journal	Journal of International Money and Finance
Volume	26
Issue number	8
DOIs	https://doi.org/10.1016/j.jimonfin.2007.06.012
State	Published - Dec 2007
Externally published	Yes

All Science Journal Classification (ASJC) codes

Finance
Economics and Econometrics

Keywords

Contagion
Currency crisis
Dynamic factor analysis
Vulnerability

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10.1016/j.jimonfin.2007.06.012

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abstract = "In a case study of six East Asian economies, we use dynamic factor analysis to estimate a regional component of the exchange market pressure index (EMPI) as a measure of regional financial stress. The extent to which this indicator is explained by regional economic and financial factors is interpreted as regional vulnerability to crisis. We find that regional external liabilities and exuberance in domestic stock and credit markets, as well as the US high-yield spread, were positively correlated with regional vulnerability. Individual country EMPIs are also explained by regional factors, with country-specific factors and trade linkages playing little role.",

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AU - Taylor, Mark P.

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AB - In a case study of six East Asian economies, we use dynamic factor analysis to estimate a regional component of the exchange market pressure index (EMPI) as a measure of regional financial stress. The extent to which this indicator is explained by regional economic and financial factors is interpreted as regional vulnerability to crisis. We find that regional external liabilities and exuberance in domestic stock and credit markets, as well as the US high-yield spread, were positively correlated with regional vulnerability. Individual country EMPIs are also explained by regional factors, with country-specific factors and trade linkages playing little role.

KW - Contagion

KW - Currency crisis

KW - Dynamic factor analysis

KW - Vulnerability

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ER -

Regional vulnerability: The case of East Asia

Abstract

All Science Journal Classification (ASJC) codes

Keywords

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