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Volatility Dynamics in Foreign Exchange Rates: Further Evidence from the Malaysian Ringgit and Singapore Dollar

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  • Kin-Yip Ho

    (Department of Economics, Cornell University, Ithaca, USA)

  • Albert K Tsui

    ()
    (Department of Economics, National University of Singapore)

Abstract

Singapore dollar are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and timevarying correlations of financial time series. Consistent with the results of Tse and Tsui (1997), there is only some weak support for asymmetric volatility in the case of the Malaysian ringgit when the two currencies are measured against the US dollar. However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics, SCAPE in its series SCAPE Policy Research Working Paper Series with number 0805.

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Length: 34 pages
Date of creation: 22 Aug 2008
Date of revision:
Handle: RePEc:sca:scaewp:0805

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Web page: http://www.fas.nus.edu.sg/ecs/scape/index.html
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Keywords: Constant correlations; Exchange rate volatility; Fractional integration; Long memory; Bivariate asymmetric GARCH; Varying correlations;

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