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Volatility Spillovers in East Asian Financial Markets: A Mem-Based Approach

  • Robert F. Engle

    (Stern School of Business, New York University)

  • Giampiero M. Gallo

    (Università di Firenze and FEDRA)

  • Margherita Velucchi

    (Università di Firenze)

We model the interrelations of equity market volatility in eight East Asian countries before, during, and after the Asian currency crisis. Using a new class of asymmetric volatility multiplicative error models based on the daily range, we find that dynamic propagation of volatility shocks occurs through a network of interdependencies, and shocks originating in Hong Kong may be amplified in their transmission throughout the system, posing greater risks to the region than shocks originating elsewhere. Although this partly explains the severity of the currency crisis, we also find evidence that parameters shifted, making the system more unstable during the crisis. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00167
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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 1 (February)
Pages: 222-223

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Handle: RePEc:tpr:restat:v:94:y:2012:i:1:p:222-223
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  2. Francis X. Diebold & Kamil Yılmaz, 2007. "Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets," Koç University-TUSIAD Economic Research Forum Working Papers 0705, Koc University-TUSIAD Economic Research Forum.
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