Exchange Rates and Stock Prices Interaction During Good and Bad Times: Evidence from the ASEAN4 Countries

Using bootstrap causality tests with leveraged adjustments, we investigate the link between exchange rates and stock prices in Malaysia, Indonesia, Philippines and Thailand for the periods immediately before and during the 1997 Asian crisis. We find the two variables to be significantly linked in the non-crisis period but not at all during the crisis period. The implications of this result in terms of hedging, market efficiency, market integration and policy intervention are explained in the paper