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Volatility transmissions between renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures

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Author Info
Colavecchio , Roberta () (BOFIT)
Funke, Michael (BOFIT)

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Abstract

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.

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Publisher Info
Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 16/2006.

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Length: 34 pages
Date of creation: 26 Oct 2006
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Handle: RePEc:hhs:bofitp:2006_016

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Related research
Keywords: China; renminbi; Asia; forward exchange rates; non-deliverable forward market; multivariate GARCH models;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
F31 - International Economics - - International Finance - - - Foreign Exchange
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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