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

  • HYUN KOOK SHIN

    (Korea Institute of Finance, Korea)

  • BYOUNG HARK YOO

    ()

    (Soongsil University, Korea)

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.

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Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 37 (2012)
Issue (Month): 4 (December)
Pages: 61-77

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Handle: RePEc:jed:journl:v:37:y:2012:i:4:p:61-77
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