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The Volatility Of The Won-Dollar Exchange Rate During The 2008-9 Crisis

Author

Listed:
  • HYUN KOOK SHIN

    (Korea Institute of Finance, Korea)

  • BYOUNG HARK YOO

    () (Soongsil University, Korea)

Abstract

This paper estimates the volatility of the won-dollar exchange rate during the 2008-9 crisis. We find that the volatility increased in September 2008 and decreased in May 2009. The volatility rose gradually for one month and subdued in a similar manner, which implies that the volatility was not governed by any specific event or government policy. The overall changes in the volatility are similar to the movements of the CDS premium. We also find that the UK foreign exchange market experienced a similar pattern of volatility shifts and suffered smaller but longer volatility than the Korean one. The volatility shifts are estimated using a Markov switching GARCH model and a Bayesian method is suggested.

Suggested Citation

  • Hyun Kook Shin & Byoung Hark Yoo, 2012. "The Volatility Of The Won-Dollar Exchange Rate During The 2008-9 Crisis," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(4), pages 61-77, December.
  • Handle: RePEc:jed:journl:v:37:y:2012:i:4:p:61-77
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    References listed on IDEAS

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    More about this item

    Keywords

    Bayesian Inference; Markov Switching GARCH Models; Exchange Rate Volatility; Credit Crisis;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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