Dynamic capital mobility, capital-market risk, and contagion: evidence from seven Asian countries

Abstract

This paper analyzes three important issues related to the Asian financial crisis. First, was capital mobility increasing in this area during the 1990s? Second, was there a sudden increase of capital-market risk in those countries? Finally, is there any evidence of contagion in the Asian capital market? Using monthly time-series data, we find that capital mobility had been rapidly increasing before the crisis; there was a sudden increase in capital-market risk; and there is evidence of contagion in the Asian capital market from Thailand to other Asian countries. (C) 2002 Elsevier Science B.V. All rights reserved.