IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v85y2003i3p670-679.html
   My bibliography  Save this article

The Global Transmission of Volatility in the Foreign Exchange Market

Author

Listed:
  • Michael Melvin

    (Arizona State University)

  • Bettina Peiers Melvin

    (Arizona State University and American Express Co)

Abstract

Volatility spillovers of the DM/$ and ¥/$ exchange rate across regional markets are examined using the integrated volatility of high-frequency data. An analysis of quoting patterns reveals five distinct regions: Asia, Asia-Europe overlap, Europe, Europe-America overlap, and America. After reviewing theoretical foundations for persistence of volatility in dealership markets, regional volatility models are constructed where volatility in one region is a function of yesterday's volatility in that region ("heat-wave effect") and volatility in other regions ("meteor-shower effect"). Evidence of statistically significant effects is found for both own-region and interregional spillovers, but the economic significance of own-region spillovers indicates that heat waves are more important than meteor showers. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Michael Melvin & Bettina Peiers Melvin, 2003. "The Global Transmission of Volatility in the Foreign Exchange Market," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 670-679, August.
  • Handle: RePEc:tpr:restat:v:85:y:2003:i:3:p:670-679
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465303322369803
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:85:y:2003:i:3:p:670-679. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kristin Waites). General contact details of provider: http://mitpress.mit.edu/journals/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.