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Contagion effects of us financial crisis on Indonesia

Author

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  • Anika Sedyaning Wikanti

    (Pusat Pengkajian Ekonomi, Yogyakarta)

Abstract

This research analyzes the contagion effects of the US financial markets on Indonesian financial markets during the 2008 global financial crisis. It specifically investigates whether the slump in the US stock prices directly produced a slump in Indonesian stock prices, or indirectly through the slump in regional stock prices. It also examines whether the slump spilled over into rupiah exchange rate. Using Vector Autoregression and Vector Error Correction Model, the paper finds direct contagion effect of the US financial crisis into Indonesian stock markets. It also finds both direct and indirect contagion effect of the US financial crisis into foreign exchange market.

Suggested Citation

  • Anika Sedyaning Wikanti, 2011. "Contagion effects of us financial crisis on Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 3(2), pages 125-137, April.
    • Handle: RePEc:uii:journl:v:3:y:2011:i:2:p:125-137
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    File URL: https://journal.uii.ac.id/JEP/article/download/2325/2126
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    References listed on IDEAS

    as
    1. Mendoza, Enrique G. & Quadrini, Vincenzo, 2010. "Financial globalization, financial crises and contagion," Journal of Monetary Economics, Elsevier, vol. 57(1), pages 24-39, January.
    2. Andrew K. Rose & Mark M. Spiegel, 2010. "Cross‐Country Causes And Consequences Of The 2008 Crisis: International Linkages And American Exposure," Pacific Economic Review, Wiley Blackwell, vol. 15(3), pages 340-363, August.
    3. Frederic S. Mishkin, 2009. "Is Monetary Policy Effective during Financial Crises?," American Economic Review, American Economic Association, vol. 99(2), pages 573-577, May.
    4. Markwat, Thijs & Kole, Erik & van Dijk, Dick, 2009. "Contagion as a domino effect in global stock markets," Journal of Banking & Finance, Elsevier, vol. 33(11), pages 1996-2012, November.
    5. Hui Tong & Shang-Jin Wei, 2011. "The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis," The Review of Financial Studies, Society for Financial Studies, vol. 24(6), pages 2023-2052.
    6. Michael D. Bordo, 2008. "An Historical Perspective on the Crisis of 2007-2008," NBER Working Papers 14569, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Adhitya Wardhono & Badara Shofi Dana & M.Abd. Nasir, 2017. "Rethinking the exchange rate disconnect puzzle theory in ASEAN-6," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(1), pages 98-103, April.

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    More about this item

    Keywords

    Contagion; stock price; exchange rate; financial crisis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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