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

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  • Colavecchio , Roberta

    ()
    (BOFIT)

  • Funke, Michael

    (BOFIT)

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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Bibliographic 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
Date of revision:
Handle: RePEc:hhs:bofitp:2006_016

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

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References

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Citations

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Cited by:
  1. Michael Funke & Roberta Colavecchio, 2008. "Volatility Transmission between Renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures," Quantitative Macroeconomics Working Papers 20812, Hamburg University, Department of Economics.
  2. Behera, Harendra, 2010. "Onshore and offshore market for Indian Rupee: recent evidence on volatility and shock spillover," MPRA Paper 22247, University Library of Munich, Germany.
  3. Liu, Li-Gang & Pauwels, Laurent L., 2012. "Do external political pressures affect the Renminbi exchange rate?," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1800-1818.
  4. Gu, Li & McNelis, Paul D., 2013. "Yen/Dollar volatility and Chinese fear of floating: Pressures from the NDF market," Pacific-Basin Finance Journal, Elsevier, vol. 22(C), pages 37-49.

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