Browse > Article
http://dx.doi.org/10.5762/KAIS.2018.19.5.426

An Analysis of Exchange Rate Volatility Spillovers  

Lee, Sa-Young (Department of International Business, Chungbuk National University)
Publication Information
Journal of the Korea Academia-Industrial cooperation Society / v.19, no.5, 2018 , pp. 426-431 More about this Journal
Abstract
This study examines exchange rate volatility spillovers that affect the exchange rate volatility of Korean currency. For this study, the Japanese yen, British pound, Euro, and Canadian dollar are used as the currencies of developed countries, and the Thai baht, Indonesian rupiah, Singapore dollar, and Australian dollar are used as the currencies of the areas near Korea. The GARCH(1.1) model is employed for weekly data covering the period from January 2009 to December 2017. This study finds that the volatility spillovers from the Canadian dollar, Singapore dollar, and Australian dollar to the Korean won are significant, while the volatility spillovers from the Japanese yen, British pound, Euro, Thai baht, and Indonesian rupiah to the Korean won are insignificant. In terms of the economic system and structure, Japan, Britain, and European countries are at a higher level than Korea, while Thailand and Indonesia are at a lower level than Korea. Canada, Singapore, and Australia are almost at the same level as Korea. Therefore, these results appear to be derived from the phenomenon of exchange rate spillovers among countries with a similar economic system and structures, and contradict the literature, which has argued that exchange rates volatility spillovers occur among countries that are in the same area geographically.
Keywords
Exchange rates volatility; Volatility spillovers; GARCH; Heat wave; Meteor shower;
Citations & Related Records
연도 인용수 순위
  • Reference
1 M. Melvin, B. Melvin, "The global transmission of volatility in the foreign exchange market", Review of Economics and Statistics, vol. 85, no. 2, pp. 670-679, 2003. DOI: https://doi.org/10.1162/003465303322369803   DOI
2 D. A. Fuller, W. A. Dickey, "Distribution of the estimators for autoregressive time series with a unit root", Journal of the American Statistical Association vol. 74, no. 366, pp. 427-431, 1979. DOI: https://doi.org/10.2307/2286348
3 R. F. Engle, "Autoregressive conditional heteroskedasticity with estimates of the variance of United Kingdom inflation", Econometrica, vol. 50, no. 4, pp. 987-1007, 1982. DOI: https://doi.org/10.2307/1912773   DOI
4 T. Bollerslev, "Generalized autoregressive conditional heteroskedasticity", Journal of Econometrics, vol. 31, no. 3, pp. 307-327, 1986. DOI: https://doi.org/10.1016/0304-4076(86)90063-1   DOI
5 R. F. Engel, T. Ito, W. L. Lin, Meteor Showers or heat waves? Heteroskedastic intra-daily volatility in the foreign exchange market, Econometrica, vol. 59, no. 3, pp. 525-542, 1990. DOI: https://doi.org/10.2307/2938189
6 S. A. Ross, "Information and volatility: the no-arbitrage martingale approach to timing and resolution irrelevancy", Journal of Finance, vol. 44, no. 1, pp. 1-17, 1989. DOI: https://doi.org/10.1111/j.1540-6261.1989.tb02401.x   DOI
7 L. Raputsoane, "Exchange rate volatility spillovers and South African currency", working paper, South African Reserve Bank, Sep. 2008.
8 IMF DataMapper, Datasets, IMF Home Page http://www.imf.org/extrnal/index.htm
9 S. Chen, "Random walks in Asian foreign exchange markets: evidence from new multiple variance ratio tests", Economics Bulletin, vol. 29, no. 2 pp. 1296-1307, 2009.
10 J. Belaire-Franch, K. Opong, "Some evidence of random walk behavior of Euro exchange rates using ranks and signs", Journal of Banking and Finance, vol. 29, no. 7 pp. 1631-1643, 2005. DOI: https://doi.org/10.1016/j.jbankfin.2004.06.031   DOI
11 C. Liu, J. He, "A variance-ratio test of random walks in foreign exchange rates", Journal of Finance, vol. 46, no. 2, pp. 773-785, 1991. DOI: https://doi.org/10.1111/j.1540-6261.1991.tb02686.x   DOI
12 Y. Chang, "A re-examination of variance-ratio test of random walks in foreign exchange rates", Applied Financial Economics, vol. 14, no. 9, pp. 671-679, 2004. DOI: https://doi.org/10.1080/0960310042000233449   DOI
13 A. J. Black, D. G. McMillan, "Long run trends and volatility spillovers in daily exchange rates", Applied Financial Economics, vol. 5, no. 2, pp. 895-907, 2004. DOI: https://doi.org/10.1080/0960310042000203037