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Volatility and Causality in Asia Pacific Financial Markets

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  • Enzo Weber

Abstract

The present paper analyses interactions between the foreign exchange, money and stock markets in Asian Pacific countries from 1999 till 2006. Considering influences on financial market volatility, the estimations are carried out in multivariate EGARCH models using structural residuals. This approach consequently allows the identification of the contemporaneous effects between the variables. Structural VARs or VECMs can therefore give answers to questions of exchange rate stabilisation, monetary policy behaviour or equity market reagibility. Additionally, a correlation analysis of the identified innovations reveals the degree of coherence in the Asian Pacific region.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2007-004.

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Length: 33 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2007-004

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Keywords: Structural EGARCH; Financial Markets; Asia Pacific;

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References

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  4. Guglielmo Maria Caporale & Andrea Cipollini & Panicos Demetriades, 2000. "Monetary Policy and the Exchange Rate During the Asian Crisis Identification Through Heteroscedasticity," Discussion Papers in Economics, Department of Economics, University of Leicester 00/11, Department of Economics, University of Leicester, revised Feb 2002.
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  6. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  7. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction Of Monetary Policy To The Stock Market," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(2), pages 639-669, May.
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  9. Engle, R. F. & Granger, C. W. J. (ed.), 1991. "Long-Run Economic Relationships: Readings in Cointegration," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198283393, October.
  10. Carlos Bautista, 2003. "Interest rate-exchange rate dynamics in the Philippines: a DCC analysis," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 10(2), pages 107-111.
  11. Roberto Rigobon & Brian Sack, 2003. "Spillovers Across U.S. Financial Markets," NBER Working Papers 9640, National Bureau of Economic Research, Inc.
  12. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  13. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, National Bureau of Economic Research, Inc, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
  14. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, Econometric Society, vol. 59(2), pages 347-70, March.
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Citations

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Cited by:
  1. Enzo Weber & Yanqun Zhang, 2008. "Common Influences, Spillover and Integration in Chinese Stock Markets," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2008-072, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  2. Weber, Enzo, 2013. "Simultaneous stochastic volatility transmission across American equity markets," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 53(1), pages 53-60.
  3. Conrad, Christian & Weber, Enzo, 2013. "Measuring Persistence in Volatility Spillovers," Working Papers, University of Heidelberg, Department of Economics 0543, University of Heidelberg, Department of Economics.
  4. Enzo Weber, 2008. "Structural Dynamic Conditional Correlation," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2008-069, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  5. Weber, Enzo, 2013. "Decomposing U.S. Stock Market Comovement into spillovers and common factors," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 106-118.
  6. Enzo Weber, 2008. "Structural Constant Conditional Correlation," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2008-015, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Weber, Enzo, 2009. "Financial Contagion, Vulnerability and Information Flow: Empirical Identification," University of Regensburg Working Papers in Business, Economics and Management Information Systems 431, University of Regensburg, Department of Economics.
  8. Weber, Enzo, 2007. "Who Leads Financial Markets?," MPRA Paper 5099, University Library of Munich, Germany, revised Oct 2007.
  9. Enzo Weber, 2007. "Correlation vs. Causality in Stock Market Comovement," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2007-064, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  10. Stelios D. Bekiros, 2013. "Decoupling and the Spillover Effects of the US Financial Crisis: Evidence from the BRIC Markets," Working Paper Series, The Rimini Centre for Economic Analysis 21_13, The Rimini Centre for Economic Analysis.

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