Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures
This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.
Year of publication: |
2008
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Authors: | Colavecchio, Roberta ; Funke, Michael |
Published in: |
China Economic Review. - Elsevier, ISSN 1043-951X. - Vol. 19.2008, 4, p. 635-648
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Publisher: |
Elsevier |
Keywords: | C22 F31 F36 China Renminbi Asia Forward exchange rates Non-deliverable forward market Multivariate GARCH models |
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