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On the Dynamic Linkages Among International Emerging Currencies

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  • Zouheir Mighri

    () (IHEC, University of Sousse)

Abstract

This study examines the interdependence of US dollar exchange rates expressed in five emerging currencies. Focusing on different phases of the global financial and European sovereign debt crises, the aim of this paper is to examine how the dynamics of correlations between emerging exchange markets evolved from January 04, 2000 to July 11, 2014. To this end, we adopt a dynamic conditional correlation model into a multivariate Fractionally Integrated Asymmetric Power ARCH framework, which accounts for long memory, power effects, leverage terms and time varying correlations. The empirical findings indicate a general pattern of decrease in exchange rates correlations across the phases of the global financial crisis and the European sovereign debt crisis, suggesting the depreciation against US dollar and different vulnerability of the currencies. Moreover, our analysis supports the existence of a general pattern of increase in dynamic correlations across several phases of the two crises, indicating the existence of a “contagion effect”.

Suggested Citation

  • Zouheir Mighri, 2018. "On the Dynamic Linkages Among International Emerging Currencies," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(2), pages 427-473, June.
  • Handle: RePEc:spr:jqecon:v:16:y:2018:i:2:d:10.1007_s40953-017-0088-1
    DOI: 10.1007/s40953-017-0088-1
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    Cited by:

    1. Gaurav Raizada & Vartika Srivastava & S. V. D. Nageswara Rao, 2020. "Shall One Sit “Longer” for a Free Lunch? Impact of Trading Durations on the Realized Variances and Volatility Spillovers," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(1), pages 1-28, March.

    More about this item

    Keywords

    DCC–FIAPARCH; Global financial crisis; European sovereign debt crisis; Exchange rates; Contagion;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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