What Triggers Market Jitters? A Chronicle of the Asian Crisis

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Table 1 Stock Market Returns in U.S. Dollars (in Percent) Summary Statistics January 1, 1990 - December 31,1996 January 1, 1997 - May 25, 1998 All Days Days of Market Jitters Standard Standard Standard Country Mean Deviation Minimum Maximum Mean Deviation Minimum Maximum Mean Deviation Hong Kong 0.10 1.36 -8.45 5.86 -0.08 2.54 -13.69 18.84 -0.99 8.15 Indonesia 0.03 0.86 -4.81 3.25 -0.53 4.87 -17.03 28.67 -2.89 15.28 Japan -0.01 1.43 -7.50 11.01 -0.09 1.51 -5.53 6.82 -0.13 4.02 Korea -0.02 1.45 -8.09 8.71 -0.32 4.02 -19.16 20.47 -0.80 12.89 Malaysia 0.06 1.23 -7.34 9.92 -0.40 3.44 -12.75 16.09 1.67 10.49 Philippines 0.09 1.48 -6.03 9.19 -0.24 2.65 -9.96 14.22 0.35 7.76 Singapore 0.03 0.94 -6.31 4.97 -0.19 1.82 -8.92 10.27 -1.00 5.74 Taiwan 0.03 2.09 -9.79 10.53 0.01 1.71 -9.50 5.14 -1.92 4.27 Thailand 0.01 1.65 -8.57 8.96 -0.27 3.44 -13.38 18.35 3.31 9.46 Average 0.04 1.39 -7.43 8.05 -0.23 2.89 -12.21 15.43 -0.27 8.67

Table 2 Origins of Market Turbulence Country of Origin Number of News Originating in: Market Domestic Foreign Jitters in: Hong Kong Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand USA China Economy Economy Hong Kong 13 0 2 2 0 0 0 0 0 1 2 13 7 Indonesia 0 19 0 0 0 0 0 0 0 1 0 19 1 Japan 0 0 20 0 0 0 0 0 0 0 0 20 0 Korea 0 1 0 18 1 0 0 0 0 0 0 18 2 Malaysia 0 6 0 0 13 0 0 0 0 1 0 13 7 Philippines 0 1 0 0 1 15 0 0 0 3 0 15 5 Singapore* 1 7 0 0 3 1 7 0 0 3 0 7 15 Taiwan 1 0 1 1 0 0 0 13 0 4 0 13 7 Thailand 0 2 1 0 0 0 0 0 16 1 0 16 4 Total 15 36 24 21 18 16 7 13 16 14 2 134 48 *The number for Singapore adds to more than twenty since one of its market jitters is attributed to news from three countries. Sector of Origin Number of News of Type: Market Political Economic Capital Fiscal Monetary International Credit No Jitters in: News News Controls Policy Policy Agreements Ratings News Hong Kong 2 1 0 1 1 1 1 13 Indonesia 8 2 0 2 1 4 0 3 Japan 4 7 0 1 1 1 0 6 Korea 1 3 0 0 2 7 4 3 Malaysia 3 3 2 1 1 5 1 4 Philippines 2 1 0 0 4 0 0 13 Singapore 4 3 1 0 1 3 0 8 Taiwan 5 7 2 0 1 0 0 5 Thailand 4 2 2 2 0 2 1 7 Total 33 29 7 7 12 23 7 62

27 Table 3 Regression Analysis Dependent Variables Percent Change in Percent Change in Percent Change in Absolute Percent Stock Market Stock Market Stock Market Change in Stock Prices Prices Prices Market Prices 1 Explanatory Variables OLS Non-Linear Least Squares OLS Constant -0.45 -0.52 2.69 (-0.64) (-.74) (1.07) Political News 7.53 *** 8.09 *** 11.62 *** 8.17 *** (6.40) (6.22) (3.68) (7.9) Economic News 6.07 *** 6.24 *** 9.22 *** 6.88 *** (4.56) (4.50) (3.25) (9.12) Capital Controls 7.29 *** 7.62 *** 10.55 * 9.82 *** (2.70) (2.73) (1.88) (5.45) Fiscal Policy 0.76 -0.16 0.71 8.83 *** (0.03) (-.054) (0.19) (7.20) Monetary Policy 3.90 * 3.94 * 6.34 * 8.26 *** (1.92) (1.83) (1.88) (7.51) International 9.63 *** 10.49 *** 13.25 *** 10.75 *** Agreements (6.51) (5.97) (3.67) (12.26) Credit Ratings 10.67 *** 11.08 *** 13.95 *** 10.99 *** (3.95) (3.97) (3.66) (5.39) No News -2.44 ** -2.09 * -5.58 ** 7.10 *** (-2.15) (-1.66) (-2.09) (16.83) Differential Effect of -0.61 * Good News (-1.94) Differential Effect of -0.22 Foreign News (-1.22) Differential Effect of 0.48 No News and Foreign (0.43) Number of Observations 180 180 180 180 Adjusted R-Squared 0.42 0.42 0.43 0.45 L-M Test for Heteroskedasticity 2.09 0.91 2.50 3.89 ** Notes: ***, **, and * indicates statistical significance of 1, 5, and 10 percent respectively. T-statistics in parentheses 1. Robust standard errors are used, since the L-M test suggests the presence of heteroskedasticity.

28 Figure 1 Stock Market Indices in U.S. Dollars and Days of Stock Market Jitters Hong Kong Indonesia 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Japan Korea 120 140 100 120 100 80 80 60 60 40 40 20 20 0 0 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Malaysia Philippines 120 120 100 100 80 80 60 60 40 40 20 20 0 0 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Singapore Taiwan 120 160 140 100 120 80 100 60 80 60 40 40 20 20 0 0 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Thailand 120 Proportion of Daily Returns Explained by Exchange 100 Rate Fluctuations (in Percent) January1, 1997- May 25, 1998 Days of Market Jitters All Days 80 Hong Kong: 0 0 Indonesia: 74 67 60 Japan: 34 51 Korea: 50 38 40 Malaysia: 36 39 Philippines: 34 40 20 Singapore: 23 32 Taiwan: 25 21 Thailand: 39 44 0 Jan-97 Mar-97 May-97 Jul-97 Oct-97 Dec-97 Feb-98 May-98 Notes: January 1, 1997 = 100 Triangles: Days of Positive Market Jitters Circles: Days of Negative Market Jitters

Figure 2 Evolution of Market Turbulence 8 Jan. 14, 1998 Jan. 19, 1998 6 4 2 0 -2 -4 Feb. 16, 1998 Dec. 11, 1997 Jan. 12, 1998 -6 Oct. 28, 1997 -8 Jan-97 Feb-97 Mar-97 Apr-97 May-97 Jun-97 Jul-97 Sep-97 Oct-97 Nov-97 Dec-97 Jan-98 Feb-98 Apr-98 May-98 Notes: Bars indicate the number of countries that experience market jitters on a particular day. Positive (negative) bars indicate market upturns (downturns).

30 Figure 3 Time-Varying Effect of News on Stock Markets No News International Agreements 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 Jun-97 Oct-97 Nov-97 Dec-97 Jan-98 Feb-98 Dec-97 Jan-98 Jan-98 Feb-98 May-98 Economic News Political News 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 Sep-97 Oct-97 Dec-97 Jan-98 Jan-98 Mar-98 Sep-97 Oct-97 Dec-97 Jan-98 Jan-98 Mar-98 "Good" News "Bad" News Note: These plots report the evolution of the coefficient aiand biin equation (4): R j = a 0 + (cid:229) n a iDG i + (cid:229) n b iDB i + e j. t t t t t t i=1 i=1 Confidence bands represent +/- one standard error. DG (DB) takes value of 1 if there is “good” news ( “bad” news) and zero otherwise. For each series, the initial values of both coefficients were estimated using a sample composed of the first 20 observations. Each subsequent values were estimated by adding one observation to the sample until all observations were included.

Figure 4 Market Jitters: Event-Study Analysis Cumulative Abnormal Returns in Days of Market Rallies Cumulative Abnormal Returns in Days of Market Downturns Days with No News Number of Events: 19 Days with No News Number of Events: 43 20 10 0 -10 Days with News Number of Events: 57 Days with News Number of Events: 61 Proportion of Days with Persistent Market Jitters Market Market Market Market News of Type: Rallies Downturns News Originating in: Rallies Downturns Political News 0.61 0.20 Hong Kong 1.00 0.33 Economic News 1.00 0.57 Indonesia 0.83 0.21 Capital Controls 0.80 0.50 Japan 0.63 0.42 Fiscal Policy 1.00 0.50 Korea 0.56 0.82 Monetary Policy 1.00 0.67 Malaysia 0.67 0.36 International Agreements 0.79 0.33 Philippines 0.80 0.40 Credit Ratings 0 0.50 Singapore 1.00 0.33 No News 0.68 0.37 Taiwan 0.83 0.50 Thailand 0.67 0.38 Solid line is the mean of cumulative aggregate returns (CAR) in percent. Dashed lines are +/- one standard deviation from the mean. Persistent positive (negative) movements are defined as movements with CARs that remain postive (negative) on day 10. 01- 8- 6- 4- 2- 0 2 4 6 8 01 20 10 0 -10 Day 01- 8- 6- 4- 2- 0 2 4 6 8 01 Day 20 10 0 -10 01- 8- 6- 4- 2- 0 2 4 6 8 01 20 10 0 -10 Day 01- 8- 6- 4- 2- 0 2 4 6 8 01 Day

Appendix Table Daily Returns (in Percent) and News in Days of Market Jitters Date HK Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand News in Bloomberg 1/9/97 -1.89 -0.77 -2.81 2.68 0.03 0.44 0.10 -0.13 1.22 Bad loans may hobble economic growth. (Japan, NN, 1) 3/21/97 0.12 -1.10 N/A -2.49 -1.19 -0.17 -1.52 -3.19 -0.28 Govt. suspends pork exports due to epidemic. (Taiwan, EN, - 1) 3/24/97 2.06 -0.90 -1.07 -2.00 0.14 0.64 1.09 -3.82 1.70 Farm losses will hurt economic growth. (Taiwan, EN, -1) 5/5/97 2.41 1.05 N/A N/A -0.15 4.93 0.99 0.79 N/A Inflation falls to 4.6. (Philippines, EN, 1) 5/12/97 0.42 0.38 3.53 -2.13 -1.96 N/A 1.58 -3.56 -1.85 JPN: No news. (Japan, NN, 1) TAI: Foreign investors move $1.1bn out on news of resignations of senior govt. officials. (Taiwan, PN, -1) 5/14/97 1.80 -0.89 1.15 N/A -1.48 1.10 -0.22 2.87 -6.93 Baht drops amid concern about political stability. (Thailand, NN, 1) 6/16/97 1.98 0.93 1.09 -0.06 -0.21 -0.37 -0.01 3.77 0.38 Higher profits in semiconductor makers and local property market is reviving. (Taiwan, EN, 1) 6/19/97 2.11 -0.48 -0.15 -0.28 0.78 3.56 0.68 -0.93 -10.78 Finance Minister Viravan resigns. (Thailand, PN, -1) 6/23/97 -0.93 1.05 -0.71 -2.24 -0.74 -2.52 0.63 0.56 7.32 New finance minister to announce measures to boost the finance industry. (Thailand, PN, 1) 7/4/97 -1.55 0.25 0.28 0.82 -0.84 0.56 0.59 1.86 6.99 Devaluation of the baht will revive economy. (Thailand, NN, 1) 7/11/97 2.52 -1.52 -0.20 -0.08 0.34 -3.75 0.16 -0.51 -7.49 Thai baht tumbles as regional currency concerns widens. (Thailand, NN, 1) 8/11/97 -1.13 -3.21 -1.74 1.79 -6.45 -3.06 -4.21 -0.23 -2.59 Japanese trade surplus with the US widens. (USA, EN, -1) 8/22/97 -1.46 -3.75 -1.72 -0.49 -0.50 -1.06 0.02 -0.05 -7.47 Central bank discloses that net foreign reserves fell 25 in 9 months to defend baht. (Thailand, EN, -1) 8/25/97 1.10 -7.17 -1.94 0.16 -2.53 -2.88 0.50 -0.10 -7.59 Standard & Poor may cut ratings for Thailand sovereign debt. (Thailand, CR, -1) 8/28/97 -4.31 -7.75 -0.32 -1.73 -6.54 -9.50 -4.60 -2.11 -2.76 PHI, SNG: Tighter credit as reserve requirements rise. (Malaysia, MP, -1) 8/29/97 -5.15 -7.37 -1.45 -1.80 -1.24 -2.95 -0.98 N/A -2.32 Local interest rates surge. (Hong Kong, NN, 1) 9/1/97 -5.18 -0.60 -2.98 -3.46 N/A -2.68 -2.82 N/A -2.12 HK: Higher interest rates may erode corporate profits. (Hong Kong, NN, 1) JPN: Concern about Asian turmoil raises concern that Japanese economy is not improving (Japan, NN, 1) 9/3/97 6.90 7.02 3.01 0.00 -7.81 -2.21 0.36 2.66 -1.69 HK, JPN: Japanese finance minister announces that Japan will not try to weaken the dollar. (Japan, PN, 1) MAL: Trading restrictions have been imposed. (Malaysia, CC, - 1) 9/4/97 -3.59 4.15 0.16 -0.33 -4.25 2.06 0.05 -3.37 -0.97 Doubt whether island’s stock market would be able to withstand slide in regional equity markets. (Taiwan, NN, 1) 9/5/97 2.56 13.29 -0.36 1.75 14.92 1.60 3.99 1.55 5.82 IND: Rupiah strong despite cut in interest rates. (Indonesia, MP, 1) MAL: Curbs on trading end and large public projects are shelved. (Malaysia, CC/FP, 1/1) SNG: Malaysia takes steps to liberalize their equity markets. (Malaysia, CC, 1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap2ore Taiwan Thailand News in Bloomberg 1.65 2.58 -0.09 -0.44 7.45 0.03 2.85 -1.52 8.05 MAL: 3 major public works projects are delayed. (Malaysia, FP, -1) THA: Deregulation package (including cuts in govt. spending), will help bring down interest rates and shore up the rupiah. (Indonesia, FP, -1) 9/9/97 1.30 -0.30 2.04 -1.42 1.57 9.04 2.49 -0.76 0.34 Central Bank able to buy dollars in spot markets(cid:190) pressure on the peso may be easing. (Philippines, NN, 1) 9/12/97 1.11 -1.79 -2.74 0.58 1.58 0.40 0.06 0.44 -4.73 Govt. says that economy posts its biggest contraction in the April-June period. (Japan, EN, -1) 9/18/97 N/A 0.10 0.30 N/A -2.73 -5.95 -0.63 0.59 2.21 Currency falls amid concern that loan defaults and political tension could cause an outflow of investment. (Philippines, NN, 1) 9/19/97 -0.25 0.92 -0.35 -2.23 -0.42 5.15 -0.05 1.15 0.04 Central bank lowers rates for reserve repurchase instruments. (Philippines, MP, 1) 10/8/97 0.17 2.06 1.04 -3.19 7.54 0.78 0.18 0.45 -1.04 Finance Minister says that the budget would restore the economy’s health. (Malaysia, PN, 1) 10/9/97 -3.87 2.92 -1.04 -0.17 3.50 7.05 0.34 2.48 -1.03 Borrowing costs come down as the central bank cuts the overnight borrowing rate. (Philippines, MP, 1) 10/16/97 1.37 -2.84 2.49 -4.37 -0.63 -0.49 -1.40 -3.39 -1.70 Compaq, Sears Roebuck, and Merck announces disappointing earnings. (USA, EN, -1) 10/17/97 0.22 3.13 -0.34 1.07 -3.70 -0.19 0.24 -5.48 -0.99 Market shares and earnings of Taiwanese computer companies in the US fall. (Taiwan, EN, -1) 10/20/97 -4.78 -4.31 -2.51 -4.44 -4.95 -1.39 -2.73 -9.98 -6.19 HK: Stocks fell as banks raised mortgage lending rates. (Hong Kong, NN, 1) TAI: Central Bank says that it would let market forces determine the Taiwan dollar rate. (Taiwan, CC, 1) 10/21/97 -4.58 0.98 0.09 0.15 -1.45 -1.85 -1.87 5.01 -0.70 Govt. unveils a series of measures to bolster stocks by cutting the minimum deposit needed to buy shares and raised the deposit required to bet against them. (Taiwan, CC, 1) 10/22/97 -6.37 -3.48 1.35 6.91 -5.57 -4.67 -3.30 0.79 -2.89 Rising interest rates and calls to abandon the currency peg sends stocks tumbling. (Hong Kong, NN, 1) 10/23/97 -10.73 0.32 -2.08 -0.19 -2.67 -2.33 -3.55 1.65 N/A HK: Chief executive says that interest rates may have to go up to defend currency. (HK, PN, -1) SNG: Report by SBC Warburg says that Singapore’s GDP growth to slow to 2(cid:190) down from the 6 projected earlier. (Singapore, EN, -1) 10/24/97 6.72 0.99 -0.35 -6.53 -2.46 -3.26 -1.36 -1.81 N/A Interest rates fall allaying concern that the peg to the US would break. (Hong Kong, NN, 1) 10/27/97 -6.08 -1.04 -1.74 -8.45 0.98 0.22 0.71 -1.21 -0.22 Concern that rising interest rates may erode corporate profits. (Hong Kong, NN, 1) 10/28/97 -14.72 -10.74 -2.52 -8.73 -9.06 -6.22 -7.23 -7.03 -7.58 Worst plunge in US stocks since the 1987 crash. US stocks crashed on concern that Asian economies were slowing down. (USA, NN, 1) SNG: Stocks plunge following crash in Hong Kong. (Hong Kong, NN, 1) 10/29/97 17.26 5.11 3.11 1.58 3.22 5.22 3.40 -1.80 -2.24 Markets surge as US stocks soared in the busiest day ever. (USA, NN, 1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap3ore Taiwan Thailand News in Bloomberg 11/3/97 5.76 9.53 N/A 7.76 12.18 1.02 7.35 N/A 0.97 HK: China eases credit. (China, MP, 1) MAL: Ringgit soars along with the rupiah after bank reforms in Indonesia. (Indonesia, EN, 1) SNG: Stocks soar in the wake of IMF rescue package for Indonesia. (Indonesia, IA, 1) 11/4/97 -4.31 -0.16 N/A 6.73 0.82 4.09 0.50 3.46 10.83 TAI: Stocks rally after surge in DOW. (USA, NN, 1) THA: PM may quit paving the way for a new govt. (Thailand, PN, 1) 11/7/97 -2.98 -3.78 -3.46 -7.66 -3.43 0.10 -1.05 -3.54 8.64 JPN: Bank of Yokohama to liquidate its entire equity portfolio. Concern about banks’ exposure to bankruptcies (Japan, EN, - 1) TAI: Stocks drop on concern that currency may weaken if Korean Won continues to depreciate (Korea, NN, 1) THA: News that Democrat party leader Chuan Leekpai may be next Prime Minister. (Thailand, PN, 1) 11/17/97 4.54 -0.87 6.60 -6.75 -1.97 2.08 1.37 2.35 -5.40 Premier hints that public spending may be used to stimulate the economy. (Japan, PN, 1) 11/18/97 -1.69 -0.75 1.20 -0.88 -9.24 -3.19 -0.52 -1.87 -0.90 United Engineers bails out parent company. Stocks fall on concern that regulatory environment is lax. (Malaysia, EN, 1) 11/19/97 -0.90 -5.18 -5.68 -0.63 -4.55 0.32 -1.71 -2.14 -1.82 Govt. issues confusing signals about propping up the financial sector. (Japan, EN, -1) 11/20/97 -096 -6.55 2.02 -12.39 -13.64 -0.05 -0.75 -0.19 -3.10 KOR: Govt. widens trading band to shore up financial sector. (Korea, MP, 1) MAL: Stock plunges on concern of more corporate bailouts of troubled companies by cash rich units. (Malaysia, NN, 1) 11/21/97 4.83 -2.49 3.58 11.40 6.87 -0.29 1.51 0.87 HK, KOR: Govt. seems poised to turn to the IMF to contain the financial crisis. Stocks rise. (Korea, IA, 1) JPN: ruling party moves towards using public funds to shore up Japan’s financial system. (Japan, EN, 1) MAL: Strong ringgit boosts stocks. (Malaysia, NN, 1) 11/24/97 0.30 3.97 N/A -14.40 0.64 -0.93 2.57 2.94 -2.00 IMF imposes tax raises and spending cuts as part of bailout. Growth may slow down. (Korea, IA, 1/) 11/25/97 -2.48 -4.15 N/A -6.03 -5.65 -2.60 -1.56 -3.34 -4.67 Uncertainty exists about whether ruling party KMT would win the county polls. (Taiwan, PN, -1) 11/28/97 -0.53 N/A 0.05 -9.41 -1.73 0.17 -0.36 -0.24 -2.49 Korean stocks tumble on concerns of slowing economic growth. (Korea, NN, 1) 12/1/97 2.09 N/A 0.43 -6.14 -4.44 -0.29 -0.11 -4.71 -4.22 Ruling KMT loses majority in local govt. elections casting doubts over its future. (Taiwan, PN, -1) 12/2/97 4.17 -4.25 0.37 -7.95 0.59 -0.02 0.94 3.42 -1.54 Japanese PM said that he would do anything necessary to safeguard the financial system. (Japan, PN, 1) 12/4/97 2.37 2.70 -2.31 8.74 3.46 0.94 0.82 2.85 2.84 Govt. promises to increase access to financial markets in return for $55bn IMF bailout. (Korea, IA, 1) 12/8/97 1.68 -0.99 -2.21 -13.37 11.58 3.19 1.88 2.37 N/A KOR: Short term foreign debt is far higher than earlier announced; lack of funds may cause financial companies to shut down. (Korea, EN, -1) MAL: Govt. announces measures to avoid asking the IMF for help. (Malaysia, IA, -1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap4ore Taiwan Thailand News in Bloomberg 12/9/97 -2.04 -9.81 2.95 -15.08 -6.57 1.18 -2.04 -1.02 -5.06 JPN: PM Hashimoto favors spending $77bn in govt. money to help banks and other financial institutions write off bad loan. (Japan, PN, 1) KOR: Govt. suspends 5 cash strapped companies. (Korea, EN, -1) 12/11/97 -5.68 -5.78 -2.76 -14.68 -10.21 -8.80 -3.28 -1.75 N/A JPN: Investors are concerned that ruling party will not be able to deliver a proposal to stabilize the financial system and boost the economy with publicly financed bonds. (Japan, NN, 1) KOR: Moody cuts rating of South Korean foreign currency bonds to Baa2. (Korea, CR, -1) MAL: High interest rates and weakening currency cause stocks to drop. (Malaysia, MP, -1) PHI: Poor economic outlook in Philippines. (Philippines, NN, 1) 12/12/97 1.84 -18.67 -2.47 -7.49 -3.43 -3.30 -1.65 0.22 -5.64 Suharto may have serious health problems. (Indonesia, PN, -1) 12/15/97 -1.71 -18.59 -2.25 18.62 -5.94 -5.70 -4.32 -3.19 -5.18 IND, Philippines: Possible freeze on loan repayments; Suharto’s health fails. (Indonesia, FS/PN, -1/-1) KOR: Hopes of accelerated assistance from the IMF. (Korea, IA, 1) SNG: Technology stocks fall - mirrors Wall Street decline amid concerns on Asian turmoil. (USA, NN, 1) TAI: Interest rates raised to support currency as currency declines in response to currency declines in the rest of Asia. Trader's bet that computer technology companies will have slow sales. (Taiwan, MP/NN, -1/1) 12/16/97 -0.84 5.34 0.53 13.98 -2.18 -7.62 -2.44 -0.81 0.32 KOR: All 3 Presidential candidates to abide by IMF deal. (Korea, PN, 1) PHI: Stocks decline after peso slides. (Philippines, NN, 1) 12/17/97 3.28 2.95 6.16 -0.40 5.00 4.44 2.60 2.79 1.84 PM Hashimoto calls for a $15.4bn income tax cut to stimulate the economy. Tax cuts to be implemented in current fiscal year as part of an economic stimulus package. (Japan, FP, 1) 12/18/97 0.59 9.96 -2.14 N/A 3.85 2.70 1.94 -0.14 9.39 Thailand stocks rose after Japanese tax cut. (Japan, FP, 1) 12/19/97 -3.31 4.03 -4.23 N/A -1.37 0.78 0.80 -2.33 -2.56 Trading company Toshuku files for bankruptcy; raises specter of more to follow. (Japan, EN, -1) 12/22/97 -2.27 -1.11 -4.19 -10.36 -1.55 -0.08 -2.15 -0.76 -1.73 JPN: Stocks fall on credit worries of more bankruptcies. (Japan, NN, 1) KOR: Moody’s cuts Korea’s credit rating to junk status (Korea, CR, -1) 12/23/97 1.90 -1.88 N/A -21.28 -2.91 -1.68 0.00 -0.56 -5.13 International credit rating agencies downgrade the Korea’s foreign currency debt. (Korea, CR, -1) 12/24/97 -0.25 -10.65 N/A 2.51 -1.21 0.04 1.14 0.10 0.14 Rupiah slides as a research report from IndoSuez securities puts foreign debt at twice the govt. forecast. (Indonesia, EN, - 1) 1/5/98 -3.59 -11.34 N/A N/A -7.23 -4.87 -2.48 N/A N/A IND: Govt. may announce a smaller budget for 1998 tomorrow, deepening problems for companies. (Indonesia, FP, -1) MAL: S&P cuts foreign currency ratings. (Malaysia. CR, -1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap5ore Taiwan Thailand News in Bloomberg 1/6/98 -1.64 -12.79 -1.10 4.61 -9.75 -10.49 -5.37 -2.36 -3.77 IND: Austere Indonesian budget mandated by IMF may deepen recession. (Indonesia, NN, 1) MAL: Ringgit falls as region’s woes keep foreign investors away. (Malaysia, NN, 1) PHI: Banks widen bands in which the currency can be traded. (Philippines, MP, 1) SNG: Stocks falls after Indonesian, Malaysian, and Philippine currencies plunge. (Indonesia/Malaysia/Philippines. (NN/NN/MP, 0/0/-1) 1/7/98 -5.95 -14.39 1.90 0.58 -6.41 -2.69 -3.53 -3.55 -0.94 HK: High local interest rates to protect currency threaten profits in Hong Kong’s real estate sector. (Hong Kong, NN, 1) IND: Stocks fall on concerns about corporate failure. (Indonesia, NN, 1) TAI: Weak currency and rising interest rates cause stocks to fall in Taiwan. (Taiwan, NN, 1) SNG: Stocks fall as banks concerned that Asian currency woes would lead to bad debts. (Singapore, NN, 1) 1/8/98 -3.14 N/A -0.30 1.06 -6.87 -4.24 -7.90 -0.52 -3.62 IMF may withdraw its bailout package for Indonesia. (Indonesia, IA, -1) 1/9/98 -3.94 N/A 0.14 -3.60 0.84 -7.25 -3.86 0.13 -1.64 PHI: Fear that economy is headed for a recession. (Philippines, NN, 1) SNG: Stocks plunge as investors bail out of region. (Singapore, NN, 1) 1/12/98 -9.06 -7.27 -3.30 13.77 -4.52 2.09 -9.35 -5.90 -8.58 HK: Peregrine files for liquidation. (Hong Kong, EN, -1) JPN: PM fails to announce new economic stimulus measures in speech to Parliament. (Japan, PN, -1) KOR: Govt. takes steps to ease a cash crunch. (South Korea, MP, 1) SNG: Stocks fall on Indonesian financial problems amid concerns that loans to Indonesia may become bad debt. (Indonesia, NN, 1) THA: Baht’s decline triggers concern over effect on company profits. (Thailand, NN, 1) 1/13/98 7.08 14.47 0.48 0.27 6.55 4.36 9.78 2.19 6.03 HK: Morgan Stanley strategists’ comments that the Asian bear market may be in its final stages. (Hong Kong, NN, 1) IND: Govt. says that it will postpone 15 power and highway projects to demonstrate commitment to reforms. (Indonesia, FP, -1) SNG: Merger of two Singaporean banks boosts investors’ confidence.(Singapore, EN, 1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap6ore Taiwan Thailand News in Bloomberg 1/14/98 5.71 20.88 2.65 7.73 13.27 7.41 5.90 4.51 11.93 HK: Bank rates for 3 month loans fell by 2.3. (Hong Kong, NN, 1) Philippines: US Treasury Deputy Secretary Lawrence Summers is dispatched to hold meetings with the Thai and Indonesian leaders. (US, PN, 1) IND, MAL, THA: IMF announces reform package for Indonesia and Suharto commits to the IMF package (Indonesia, IA/PN, 1/1) SNG: Deputy PM assures the nation that Singapore is not in danger of a banking crisis. (Singapore, PN, 1) TAI: Intel and Motorola announces strong earnings. (US, EN, 1) 1/15/98 -7.25 -12.82 N/A 10.32 -3.04 4.25 -1.54 -0.02 -3.42 HK: Speculation that property companies may default. (Hong Kong, NN, 1) KORN: Officials to travel to the US to ask international creditors to refinance $25bn short term debt. (Korea, IA, 1) IND: Promises of economic reform (phasing out food/oil subsidies and ending family monopolies) were met with skepticism. (Indonesia, PN, 1) 1/19/98 5.44 -7.91 1.15 10.13 10.57 6.01 4.00 1.23 8.42 HK: Falling interest rates and brisk sale of apartments raise stocks. (Hong Kong, NN, 1) KOR: Upgraded by international credit companies. (Korea, CR, 1) MAL: Michel Camdessus makes favorable comment about economy. (Malaysia, IA, 1) PHI: Peso rises prompting optimism that Philippines would be the 1st to emerge from SE Asian crisis. (Philippines, NN, 1) SNG: Stocks rises as investors returned to the market. (Singapore, NN, 1) THA: May be able to loosen terms of IMF bailout. Camdessus says that govt. deserves full support. (Thailand, IA, 1) 1/21/98 -2.01 -9.42 1.84 -9.99 -4.69 -3.16 -0.06 2.60 2.89 Investors question whether Korean economy and corporate profits could rebound fast enough. (Korea, NN, 1) 1/22/98 -4.03 -9.58 0.16 -6.70 -4.39 -5.00 -2.43 -0.84 -3.20 Suharto plans to serve a seventh term in office. (Indonesia, PN, -1) 1/26/98 0.54 3.35 2.45 9.64 0.84 3.57 1.19 N/A 0.15 Govt. negotiators close an agreement with international creditors to exchange $25bn of commercial bank debt for long term loans. (Korea, IA, 1) 1/30/98 N/A N/A -2.65 N/A N/A 7.32 N/A N/A 10.19 PHI: Stocks soar on investor confidence. (Philippines, NN, 1) THA: Plans to lift currency controls. (Thailand, CC, 1) 2/2/98 N/A N/A -0.08 -4.57 N/A 13.29 N/A N/A 16.85 PHI: Stocks surge on hopes of economic recovery. (Philippines, NN, 1) THA: Lifts currency controls. (Thailand, CC, 1) 2/4/98 -2.13 6.70 -0.29 -2.23 -2.13 -1.36 0.31 0.04 -14.36 Thailand stocks fall as investors concluded that prices were out of line with earning prospects. (Thailand, NN, 1) 2/5/98 1.35 -3.62 1.92 -3.33 6.14 -0.77 3.61 2.03 8.64 SNG: PM says that Singapore is willing participate in a plan to guarantee payment of goods shipped to Indonesia for use in its export industries. (Singapore, PN, 1) THA: Stocks rally as investors bet that the worst of the financial turmoil is over. (Thailand, NN, 1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap7ore Taiwan Thailand News in Bloomberg 2/10/98 -0.12 25.21 0.65 -3.93 10.60 3.08 1.36 -0.39 4.01 IND: Suharto said that the government should “fix a certain exchange rate”. (Indonesia, PN, 1) MAL: Ringgit surges on expectations that Indonesia may introduce a currency board. (Indonesia, PN,1) 2/11/98 -0.62 -3.27 N/A -5.08 -1.35 7.45 0.29 2.09 N/A Peso surges on growing foreign investments that are wagering that the worst is over (Philippine, NN, 1) 2/12/98 -1.63 -10.44 N/A -3.03 -11.76 -5.14 -2.84 0.55 N/A MAL: The IMF may not support Indonesian plans to peg the rupiah to the dollar. (Indonesia, IA, -1) PHI: Stocks fall on concern that weakening regional currency may slow economic recovery. (Philippine, NN, 1) 2/16/98 -1.52 -17.24 -0.99 -8.86 -7.95 -4.66 -6.40 -0.09 -5.05 IND: The IMF warns that it may withhold emergency credit to Indonesia if it pegged the currency. (Indonesia, IA/MP, -1/-1) KOR, MAL, SNG: The IMF may not support Indonesian plans to peg the rupiah to the dollar. (Indonesia, IA, -1) 2/17/98 1.06 8.81 0.04 -2.12 6.59 2.01 4.00 0.64 6.54 Indonesia plans to go ahead and peg its currency. (Indonesia, PN, 1) 2/26/98 3.06 4.43 0.40 0.98 2.04 1.96 1.77 3.30 2.37 New Central Banker vows to defend the currency. (Taiwan, PN, 1) 3/2/98 -1.43 4.35 2.59 9.97 0.90 1.00 0.02 0.96 0.67 Japanese lenders agree to reschedule $24bn in short term Korean debt. (Korea, EN, 1) 3/4/98 -0.67 -7.44 -0.35 -0.12 -7.54 -2.19 -3.37 -2.44 -3.53 Central Bank announces that Sime Bank incurred 1.57 bn ringgit in losses for the 6 months ending 1998. (Malaysia, EN, -1) 3/5/98 -4.94 -6.48 -1.91 -8.84 -4.95 -1.37 -0.53 -2.77 -5.70 HK: Beijing’s 1998 budget will do little to boost economic growth. (China, FP, -1) KOR: Bank stocks fall on concern that losses of banks in Malaysia will be repeated across Asia. (Malaysia, NN, 1) 3/9/98 0.69 -11.42 -1.70 -1.46 -2.41 -0.25 -2.32 -0.02 0.04 IMF to postpone disbursement of $3bn from Indonesia’s aid package because of delay in implementing reforms. (Indonesia, IA, -1) 3/13/98 1.38 1.70 2.58 1.69 4.28 0.22 1.51 -0.12 6.86 Sixth consecutive monthly trade surplus for Thailand. (Thailand, EN, 1) 3/20/98 1.02 10.86 0.47 2.55 0.98 0.32 -1.16 0.49 0.87 Govt. scotches proposal to peg rupiah to the dollar raising the likelihood of an IMF agreement. (Indonesia, IA/MP, 1/1) 3/30/98 -1.98 -1.72 -3.60 -4.72 -1.14 -0.86 -1.87 -0.69 -0.24 Govt. figures shows that Feb. industrial output fell by 3.3. (Japan, EN, -1) 4/10/98 N/A N/A 3.77 0.61 0.54 N/A N/A -0.09 1.25 The Bank of Japan intensifies its sale of dollars to prop up the currency. (Japan, MP, -1) 4/16/98 -1.61 -2.37 -2.83 -2.83 -3.21 -1.54 -2.18 -0.49 N/A G7 fails to come up with a solution to revive the sluggish Japanese economy. (Japan, IA, -1) 4/27/98 -2.65 -1.62 -3.69 -1.88 -2.94 -3.09 -1.13 -2.09 -1.99 Key economic indicators paint gloomy picture. Unemployment rose, industrial output, and consumer spending fell. (Japan, EN, -1) 5/6/98 -0.44 -11.34 N/A N/A -7.75 -3.42 -1.89 -0.13 N/A Student riots create political uncertainty (Indonesia, PN, -1) Worries of unrest in Indonesia (Indonesia, PN, -1) 5/13/98 -3.84 -18.34 -0.47 0.19 -5.28 -3.21 -4.98 -1.26 -4.40 Student protests calling for Suharto’s ouster escalate in Indonesian capital. (Indonesia, PN, -1) 5/14/98 1.30 -11.37 0.01 0.81 4.66 -2.14 -1.28 -0.05 0.46 Violent protests against the Suharto regime erupt. (Indonesia, PN, -1)

Date HK Indonesia Japan Korea Malaysia Philippines Singap8ore Taiwan Thailand News in Bloomberg 5/18/98 -1.35 -17.81 -1.51 1.18 -4.07 0.08 -3.09 -1.38 -3.88 Calls for Suharto’s resignation mount; cabinet reshuffle viewed skeptically as more radical measures are believed to be needed to restore the battered economy. (Indonesia, PN, -1) 5/20/98 1.07 11.39 0.50 4.06 3.68 2.78 0.08 1.88 2.83 Suharto may step down. (Indonesia, PN, 1) CC: Capital Controls FP: Fiscal Policy MP: Monetary Policy IA: International Agreements (IMF, World Bank, US Banks etc. ) CR: Credit Ratings PN: Political News (includes Political Talk and Political Events) NN: No News (in the market) EN: Economic News (includes Financial Sector, Real Sector, and External Sector) HK Hong Kong IND Indonesia JPN Japan KOR Korea MAL Malaysia PHI Philippines SNG Singapore TAI Taiwan THA Thailand Notes: Bold numbers represent market jitters. The variable international agreements takes the value of 1 (-1) whenever the country accepts or becomes closer to (moves away from) accepting an agreement with international institutions. Credit ratings upgrade (downgrades) are denoted by 1 (-1).Good (Bad) economic news are denoted by 1 (-1). Expansionary (contractionary) monetary or fiscal policies are denoted by 1 (-1). The variable capital controls takes the value 1 whenever restrictions on capital movements are lifted, -1 whenever more restrictions are imposed. The variable political news takes the value 1 whenever there are events that generate political stability, -1 in the opposite cases. The parenthetical statements after each news event explain the country from which the news originated, our classification of the news, and the value of the corresponding dummy variable respectively. For example, for the last day of market jitters (May 5, 1998) the news of President Suharto’s possible resignation originated in Indonesia, it is classified as political news (PN), and it takes the value of 1 because the event added political stability.