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This paper investigates the degree of volatility and asymmetric behavior of real exchange rates in East Asian. Exponential generalized autoregressive heteroskedasticity (EGARCH) is deployed to estimate the volatility of the exchange rate returns before and after the 1997 Asian financial crisis. We found that the EGARCH (1,1) specification fits the monthly currency series of the Asian currencies well, suggesting that volatility in exchange rates is time varying and asymmetric. The results show that before the crisis, only three currencies displayed evidence of asymmetries in their conditional variance. After the sharp fall in their currencies, all but one showed a significant increase in volatility and asymmetric effect. We conclude that the crisis caused a contagion that spread through the currency markets. The results of this study underline the importance of economic and political stability in the member countries for the stability of the regional economy.

This paper investigates the determinants of savings in Asia and compares them with those of the economies in Latin America. The evidence based reveals that countries in the two regions share some common features with respect to their savings rates that are largely affected by (1) international capital inflows, which, in general, displace domestic savings in less than one-to-one fashion; (2) dependency ratios, hence supporting life-cycle hypothesis; and (3) the size of the export sector which can contribute positively to national savings. Despite these similarities, a number of important differences can be identified across country groups. First, economic growth affects national savings positively (negatively) in Asia (Latin America). Second, the long-term negative impact of capital flows on domestic savings appears to be considerably weaker in the Asian countries compared to the Latin American countries. Together, the two factors explain why savings ratios may differ markedly between the two regions.