The effect of the Asian financial crisis on the relationships among open macroeconomic factors for Asian countries
This study investigates the effect of Asian financial crisis on the relationships among exchange rate volatility, export, import, and productivity for Taiwan, Korea, Malaysia, and Indonesia. Cointegration tests show no change for the long-run equilibrium relationship among these variables throughout the crisis. Granger causality finds that some exogeneity orderings alter from pre- to post-crisis periods for the countries considered. Impulse response functions (IRs) for the pre-crisis period demonstrate the primary importance of productivity, then second importance of export. For the post-crisis period, oscillatory paths around zero of the IRs imply an ambiguous finding for the direction of effect and relative exogeneity among variables studied. The variance decompositions in export for Taiwan, Korea and Malaysia, and in productivity for Malaysia and Indonesia did not change from the pre-crisis to the post-crisis era. However, most of the rest of the forecast error variances in variables were decomposed into their own innovation more proportional in the pre-crisis period than in the post-crisis period.