JCI-JSC-WP-2021-02: Contagion Effect in ASEAN-5 Exchange Rates during COVID-19

Publication date: October 2021 | Length of paper: 26 pages | ISBN: TBC

The aim of this study is to examine the short and long run contagion effects in ASEAN-5 exchange rates during Covid-19 period using daily exchange rates from June 2019 to December 2020. We adopt VECM within the structural VAR framework and higher time-frequency wavelet analysis to identify the pure contagion that happens in the short run and fundamentals-based contagion in the long run. The VECM findings show that there exist a long run exchange rates equilibrium during Covid-19 and should there be any disequilibrium, daily rate of adjustments in the Indonesian rupiah, Malaysia ringgit and Singapore dollar are 6.58%, 1.47% and 2.45% respectively. The wavelet power spectrum provides evidence of short run pure contagion that leads to fundamentals-based contagion for Indonesia, Malaysia and Singapore. The Philippines only experience short run contagion while Thailand experiences more of a long run contagion. Furthermore, the wavelet coherence shows Indonesia rupiah that would react first during this pandemic while the Philippines peso is the last one to react. These findings are important as it gives insights into the nature of contagion among ASEAN-5 exchange rates due to global shock of Covid-19 and the need for timely intervention to prevent the short run contagion turning into the long run contagion.

Keywords: currency linkages, exchange rates, contagion, Covid-19, ASEAN, wavelet analysis, vector error correction model

JEL Classification: F41, F30 and C10.

Download Paper


The JCI-JSC Working Paper series is published to disseminate preliminary research findings and stimulate intellectual discourse on wide-ranging public policy issues, ranging from security to sustainability. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the Jeffrey Cheah Institute on Southeast Asia and the Jeffrey Sachs Center on Sustainable Development.

Related Publications

Related Events

The 17th EAEA International Convention (2022)

August 27, 2022 • 8:00 am - August 28, 2022 • 5:00 pm

World class academics, economists, and policymakers present their papers on “Growth, Resilience and Sustainability: Asian Dynamism in an Uncertain World”.

The Covid-19 pandemic is the most serious shock to the peacetime global economy in 90 years. The webinar will bring together leading researchers and expert panel to discuss key economic and social issues related to the economic resilience and recovery of East Asia.

Prof Woo Wing Thye, Prof Noor Azlan Ghazali, and Prof Yeah Kim Leng consider the tradeoffs and complementarities on the optimal policy mix and implementation priorities to attain the nation’s short and medium to long term goals.

Related Research Pillar:

Economic Studies

Read More