Volatility Spillovers between Equity and Currency Markets in ASEAN-5 Countries during Crises

The interplay between equity and currency markets has attracted many researchers to study the effects of volatility spillover between them. Our paper investigates and compares the volatility spillover effects between stock market returns and exchange rate changes within the same economy in the ASEAN-5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) during two crises, namely the Asian crisis and subprime crisis. We use daily data and consider the bivariate VAR(1)-GARCH(1,1) model with BEKK representation to examine the spillover effects. Although the volatility spillover effects within the economy vary during different crises for different countries, we find evidence that exchange rate fluctuations have strong influences on the volatility of stock market.