Title: Investigating contagion effect of the recent Turkey currency crisis

Authors: Narinder Pal Singh; Suzan Dsouza

Addresses: School of Business and Information Technology, Cambrian College of Applied Arts and Technology, 1400 Barry Downe Road, Greater Sudbury, ON, P3A 3V8, Canada ' College of Business Administration, American University of the Middle East, Dasman, 15453, Kuwait

Abstract: This study empirically analyses the contagion effect of Turkey Lira crisis 2018 on the currencies of selected Asian (Indonesia, Malaysia, South Korea and India) and other six countries (Chile, Argentina, Mexico, Brazil, Russia and South Africa) using correlation and volatility analysis. The results of correlation analysis show that Turkey's lira bears a positive correlation with all the other select currencies in all the three periods; the whole period, the pre-crisis period and the post-crisis period. Almost all the correlation coefficients are significant at 1% or 5% level of significance across the crisis and have increased after the recent turkey lira crisis. From the results of volatility spillover analysis using exponential generalised autoregressive conditional heteroscedasticity (EGARCH) model, we infer that the Turkey currency crisis has affected the volatility of currencies of India, Brazil, Argentina & South Africa, and the effect being the least on the Indian rupee volatility while the maximum impact on the South African rand volatility.

Keywords: contagion; Turkey crisis; currency; correlation; volatility.

DOI: 10.1504/IJMEF.2022.124960

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.2, pp.118 - 137

Received: 22 Dec 2020
Accepted: 06 Sep 2021
Published online: 18 Aug 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article