The liquidity contagion in the ASEAN-5
Friska Amelia Pratiwi , Zaafri Ananto Husodo
Universitas Indonesia
Abstract
This paper aimed to analyze the role of liquidity channel in the spread of external shock in ASEAN-5, that consist of Indonesia, Malaysia, Singapore, Thailand, and Philippines. In purpose to see the linkage of market liquidity across countries, the authors used Granger causality. Data were divided into 4 sub-period ( Pre crisis period, Crisis period, Transition period, and Post crisis period), to implement the causality methodology. The crisis had impact on underlying the microstructure foundation and can lead to the flight to quality phenomenon, where investors move their asset from the risky one to the safe and liquid assets. The result showed that there was an increase of cross-market linkage in liquidity channel after the crisis period.
Keywords: contagion ; liquidity ; flight to quality ; stock markets; financial integration
Topic: Finance