Using a nonparametric technique for the identification of regime shifts, we find breaks in the structural relations between currency and equity returns and return volatility in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand during the recent Asian crisis. Volatility breaks occurred in late 1994 and 1997, while return breaks were concentrated in early 1998. After the estimated breaks, many Asian equity markets became more responsive to the volatility of the corresponding domestic exchange rate. We find that information spillover and portfolio rebalancing, rather than common information shocks, represented major channels for the transmission of breaks across countries.
Kallberg, J. G., Liu, C. H., & Pasquariello, P. (2005). An examination of the Asian crisis: Regime shifts in currency and equity markets [Electronic version]. Journal of Business, 78(1), 169-211. Retrieved [insert date], from Cornell University, School of Hospitality Administration site: http://scholarship.sha.cornell.edu/articles/10/