Currencies' exchange rate trend-before and after financial crisis

Abstract

Do financial crises tend to arise together? Recent financial crisis that has originated from credit crisis in US in 2008 spread throughout countries ranging from Asia, to Europe, to Africa. Generally a shock to one country's asset market that causes changes in asset prices in another country's financial market is called financial contagion. While financial turbulence from Lehman bankruptcy spread crisis over a large number of countries, can we say that there is financial contagion? Were countries in different regions of the globe affected in the same way? This thesis will analyze credit crisis by looking into the extent to which it affected 34 countries in six different regions of the world. Foreign exchange markets are often in conjunction with a banking system crisis. In recent credit crunch a banking problem led exchange rate movement. The thesis is particularly focusing on recent volatility of exchange rates in the world.