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Regime-switching analysis for the impacts of exchange rate volatility on corporate values: a Taiwanese case

Listed author(s):
  • Chien-Chung Nieh
  • Jeng-Bau Lin
  • Yu-Shan Wang
Registered author(s):

    A second-moment, regime-switching model with not only a switching intercept and a switching slope, but also a switching error variance, is applied to examine the impacts of exchange rate volatility (ERV) on corporate values (CV) for the 10 industries investigated in Taiwan. Two different regimes categorized as strong-impact and weak-impact are identified. The dominant power varies from one industry to another. The Wald statistics for the null of equality are ambiguous, which show that if the Markov-switching (MS) model is plausible, then the ERV might not be one major factor, but another factor that could switch the CV of Taiwan's industries. For the model's volatility influence, the data of 8 out of 10 industries are shown to fit a two-state model when the volatility is stimulated. A two-state, first-order MS model is appropriate for the 'goodness of fit' analysis at the 10% significant level.

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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 40 (2008)
    Issue (Month): 4 ()
    Pages: 491-504

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    Handle: RePEc:taf:applec:v:40:y:2008:i:4:p:491-504
    DOI: 10.1080/00036840600690066
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