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Time-varying volatility spillover of foreign exchange rate in three Asian markets: Based on DCC-GARCH approach

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  • Mohini GUPTA

    (Jaypee Institute of Information Technology, India)

  • Purwa SRIVASTAVA

    (Jaypee Institute of Information Technology, India)

  • Amritkant MISHRA
  • Malayaranjan SAHOO

    (National Institute of Technology (NIT) Rourkela, Odisha, India)

Abstract

This empirical analysis endeavors to examine the return volatility, co volatility and spillover impact of Australian dollar, Canadian dollar, Japanese yen, and Swiss franc in pertinent Asian economies such as India, Malaysia, and Singapore, by using the variance decomposition and GARCH-DCC techniques with the help of daily time series data from five years from 2012 to 2019. The result of GARCH-DCC analysis shows the evidence of ARCH and GARCH effect on all the tradable currencies, in the foreign exchange markets of above countries. The consequence of volatility spillover proves that, the Australian dollar is a net transmitter of volatility while the Canadian dollar is a net receiver of volatility in the Indian foreign exchange market. As per as Malaysian and Singapore’s foreign exchange market is concerned it can be inferred that Japanese yen is dominant currency in Malaysian market while Swiss franc is relevant in Singapore’s exchange market. These outcomes have vital ramifications that financial organizer should consider in recurrence volatility of tradable currencies of above foreign exchange market to forestall the financial risk.

Suggested Citation

  • Mohini GUPTA & Purwa SRIVASTAVA & Amritkant MISHRA & Malayaranjan SAHOO, 2021. "Time-varying volatility spillover of foreign exchange rate in three Asian markets: Based on DCC-GARCH approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(629), W), pages 105-120, Winter.
    • Handle: RePEc:agr:journl:v:4(629):y:2021:i:4(629):p:105-120
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