The impacts of financial crisis on exchange rate markets risk premia : Empirical evidences from 1997 Asia financial crisis and 2008 global financial tsunami

• Main Authors: Chia-Chuan Yeh, 葉家全
• Other Authors: Gow-Liang Huang
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/44480305764278795373

博士 === 國立高雄第一科技大學 === 管理研究所 === 99 === This study probes whether “Time-Varying Risk Premium” (TVRP) existed in the foreign exchange market of countries in the Asia Pacific Zone during the Asian Financial Crisis in 1997 and the global financial tsunami in 2008 based on the International Capital Asset Pricing Model (ICAPM) and Uncovered Interest Parity (UIP) and compares whether there were any differences in changes in the financial market and risk premium of each country between the two significant financial crises. This study analyzes the difference in changes in the financial market and risk premium of each country between these two significant financial crises. For the financial crisis in 1997, the time series of the degree of UIP deviation of each country and the conditions β value of figure represent currency risk premium and systematic risk, respectively. The empirical result indicates that both are good crisis leading indicators. As for the global financial tsunami in 2008, the risk track of the time series of the degree of UIP deviation of each country seemed to be reflected beforehand in 2007, which is a good crisis leading indicator. However, in accordance with the conditions β value of figure, a rise in the systematic risk started to appear in most countries in 2004, an early warning indicator of this financial crisis. But when the global financial tsunami started to spread from the bankruptcy of Lehman Brothers in September 2008, each country’s systematic risk was reflected at different times. The systematic risk of RMB, JPY, KRW, NTD and MYR dropped sharply in 2007 and then rapidly rose in the beginning of 2008. On the other hand, SGD, HKD, THB and IDR seemed to be reflected earlier than other countries. Their systematic risk showed a rise in the beginning of 2007. Overall, the systematic risk of each country does not seem to be a good crisis leading indicator. It might be because this global financial tsunami was caused by the subprime mortgage in the USA and the samples used in this study were countries in the Asia Pacific Zone. When probing these two financial crises, the study finds that (1) during the sample period, the systematic risk is not a constant but changes over time; (2) UIP deviation degree (currency risk premium) is a good crisis leading indicator. When the risk premium of a country’s currency rapidly rises, it must be noted that a crisis will soon occur in the country ; (3) the systematic risk is a good crisis leading indicator for the Asian Financial Crisis in 1997. However, the systematic risk does not seem to be a good crisis leading indicator for the global financial tsunami in 2008 since the systematic risk of each country is reflected at different times; and (4) Interest Rate Parity (IRP) does not hold due to time-varying risk premium.