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An empirical analysis of currency volatilities during the recent global financial crisis

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  • Ozer-Imer, Itir
  • Ozkan, Ibrahim

Abstract

This paper investigates the impact of the 2008–2009 global financial crisis on the co-movement of 16 currencies in the sample. It employs a two-step atheoretic empirical methodology; it i) applies change point estimation based on geometric Brownian motion to detect change points in volatilities and ii) applies Engle's (2002) dynamic conditional correlation (DCCR) approach to estimate time varying correlations and then, observes the behavior of volatility co-movements during the periods found in (i). The results show that volatilities increase at least twofold with the outbreak of the crisis and there is an inverse relationship between volatility and the duration of the crisis. The DCCRs usually increase with the onset of the crisis and they fluctuate smoothly afterwards while keeping that increased level.

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  • Ozer-Imer, Itir & Ozkan, Ibrahim, 2014. "An empirical analysis of currency volatilities during the recent global financial crisis," Economic Modelling, Elsevier, vol. 43(C), pages 394-406.
  • Handle: RePEc:eee:ecmode:v:43:y:2014:i:c:p:394-406
    DOI: 10.1016/j.econmod.2014.09.008
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    Cited by:

    1. Afanasiev, Dmitriy & Fedorova, Elena, 2016. "Currency integration of Russia and other CIS countries: what is changing in a crisis?," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 133-147, April.
    2. repec:bor:bistre:v:17:y:2017:i:1:p:25-48 is not listed on IDEAS
    3. Domagoj Sajter, 2015. "When Can We Call It “Extraordinary Circumstances”? Examination of Currency Exchange Rate Shocks," MIC 2015: Managing Sustainable Growth; Proceedings of the Joint International Conference, Portorož, Slovenia, 28–30 May 2015, University of Primorska, Faculty of Management Koper.
    4. Pami Dua & Divya Tuteja, 2016. "Contagion in International Stock and Currency Markets During Recent Crisis Episodes," Working papers 258, Centre for Development Economics, Delhi School of Economics.
    5. Dua, Pami & Tuteja, Divya, 2016. "Financial crises and dynamic linkages across international stock and currency markets," Economic Modelling, Elsevier, vol. 59(C), pages 249-261.

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