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Reassessing the Link between the Japanese Yen and Emerging Asian Currencies


  • Bong-Han Kim
  • Hyeongwoo Kim
  • Hong-Ghi Min


We reassess the degree of exchange rate co-movement between the Japanese yen and 5 emerging Asian currencies relative to the US dollar in the 2000s. It is often claimed that these currencies have been closely tied with the Japanese yen possibly due to active interactions of Japan and emerging Asian economies. We question the validity of such claims, reporting substantially lower, even negative, dynamic conditional correlations between these currencies and the yen-dollar exchange rate in the second half of the 2000s. Our novel multivariate GARCH framework identifies the liquidity deterioration, measured by the TED spread, and the elevated risk aversion, measured by the sovereign CDS premium, in international capital markets as the two major driving forces of such decoupling phenomena.

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  • Bong-Han Kim & Hyeongwoo Kim & Hong-Ghi Min, 2011. "Reassessing the Link between the Japanese Yen and Emerging Asian Currencies," Auburn Economics Working Paper Series auwp2011-05, Department of Economics, Auburn University.
  • Handle: RePEc:abn:wpaper:auwp2011-05

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    Cited by:

    1. Kim, Bong-Han & Kim, Hyeongwoo & Lee, Bong-Soo, 2015. "Spillover effects of the U.S. financial crisis on financial markets in emerging Asian countries," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 192-210.
    2. Vithessonthi, Chaiporn & Tongurai, Jittima, 2014. "The spillover effects of unremunerated reserve requirements: Evidence from Thailand," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 338-351.
    3. Aloui, Chaker & Hammoudeh, Shawkat & Hamida, Hela ben, 2015. "Global factors driving structural changes in the co-movement between sharia stocks and sukuk in the Gulf Cooperation Council countries," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 311-329.
    4. Hwang, Eugene & Min, Hong-Ghi & Kim, Bong-Han & Kim, Hyeongwoo, 2013. "Determinants of stock market comovements among US and emerging economies during the US financial crisis," Economic Modelling, Elsevier, vol. 35(C), pages 338-348.
    5. repec:eee:riibaf:v:42:y:2017:i:c:p:173-190 is not listed on IDEAS
    6. Berdiev, Aziz N. & Chang, Chun-Ping, 2015. "Business cycle synchronization in Asia-Pacific: New evidence from wavelet analysis," Journal of Asian Economics, Elsevier, vol. 37(C), pages 20-33.

    More about this item


    Yen-Dollar Exchange Rate; Emerging Asian Currencies; Dynamic Conditional Correlation; DCCX-MGARCH;

    JEL classification:

    • 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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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