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Common volatility across Latin American foreign exchange markets

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  • Isabel Ruiz

Abstract

This article uses high-frequency exchange rate data for a group of 13 Latin American countries in order to analyse volatility co-movements. Particular interest is posed on understanding the existence of a common volatility process during the 1995-2008 period. The analysis relies on bivariate common factor models. We test for second-order common features using the common autoregressive conditional heteroskedasticity-feature methodology developed by Engle and Kozicki (1993). Overall, the results of this article indicate that while most currencies display evidence of time-varying variance, the volatility movements in the Latin American foreign exchange markets seems to be mainly country specific. Common volatility processes seem to be present only for a few South American markets.

Suggested Citation

  • Isabel Ruiz, 2009. "Common volatility across Latin American foreign exchange markets," Applied Financial Economics, Taylor & Francis Journals, vol. 19(15), pages 1197-1211.
  • Handle: RePEc:taf:apfiec:v:19:y:2009:i:15:p:1197-1211
    DOI: 10.1080/09603100802481796
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    References listed on IDEAS

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    1. Klaassen, F.J.G.M., 1999. "Have Exchange Rates Become More Closely Tied? Evidence from a New Multivariate GARCH Model," Discussion Paper 1999-10, Tilburg University, Center for Economic Research.
    2. Sebastian Edwards, 1998. "Capital Inflows into Latin America: A Stop-Go Story?," NBER Working Papers 6441, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Hecq Alain & Palm Franz C. & Laurent Sébastien, 2016. "On the Univariate Representation of BEKK Models with Common Factors," Journal of Time Series Econometrics, De Gruyter, vol. 8(2), pages 91-113, July.
    2. Haakon Kavli & Kevin Kotzé, 2014. "Spillovers in Exchange Rates and the Effects of Global Shocks on Emerging Market Currencies," South African Journal of Economics, Economic Society of South Africa, vol. 82(2), pages 209-238, June.
    3. Arturo Lorenzo-Valdés & Antonio Ruiz-Porras, 2012. "Los rendimientos cambiarios latinoamericanos y la (a)simetría de los shocks informacionales: un análisis econométrico," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 87-113, November.
    4. David McMillan & Isabel Ruiz & Alan Speight, 2010. "Correlations and spillovers among three euro rates: evidence using realised variance," The European Journal of Finance, Taylor & Francis Journals, vol. 16(8), pages 753-767.

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