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Long run trends and volatility spillovers in daily exchange rates

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Author Info
Angela J. Black
David G. McMillan

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Abstract

Recent evidence has suggested that a model capable of capturing multiple volatility dynamics best describes daily exchange rate volatility. Estimation of a model that can capture long-run and short-run volatility movement also allows issues relating to financial and economic integration between countries to be examined. More specifically, the long-run component for comovement can be examined and spillover effects tested for in mean and volatility, the latter of which is suggestive of policy co-ordination. Using a series of dollar exchange rates supportive evidence is reported of a long-run/short-run decomposition for volatility, and existence of three long-run volatility trends, one for the European series and a trend each for the non-European series. Further, significant volatility spillovers are reported, notably amongst the European series. These results are thus supportive of increased convergence between these economies.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 14 (2004)
Issue (Month): 12 (August)
Pages: 895-907
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Handle: RePEc:taf:apfiec:v:14:y:2004:i:12:p:895-907

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Klaassen, F., 1999. "Have exchange rates become more closely tied? : evidence from a new multivariate garch model," Discussion Paper 10, Tilburg University, Center for Economic Research. [Downloadable!]
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  6. Hall, S G & Robertson, D & Wickens, M R, 1992. "Measuring Convergence of the EC Economies," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 60(0), pages 99-111, Supplemen.
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  12. Harvey, Andrew & Ruiz, Esther & Shephard, Neil, 1994. "Multivariate Stochastic Variance Models," Review of Economic Studies, Blackwell Publishing, vol. 61(2), pages 247-64, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Wölfle, Marco, 2007. "Price Discovery for Cross-Listed Securities from Emerging Eastern European Countries," ZEW Discussion Papers 07-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Marcus Pramor & Natalia T. Tamirisa, 2006. "Common Volatility Trends in the Central and Eastern European Currencies and the Euro," IMF Working Papers 06/206, International Monetary Fund. [Downloadable!]
  3. Jorge Pérez-Rodríguez, 2006. "The Euro and Other Major Currencies Floating Against the U.S. Dollar," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(4), pages 367-384, December. [Downloadable!] (restricted)
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