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

  • Colavecchio, Roberta
  • Funke, Michael

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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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 19 (2008)
Issue (Month): 4 (December)
Pages: 635-648

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Handle: RePEc:eee:chieco:v:19:y:2008:i:4:p:635-648
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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