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Volatility Dynamics in Foreign Exchange Rates : Further Evidence from the Malaysian Ringgit and Singapore Dollar

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Listed author(s):
  • Kin-Yip Ho

    (SCAPE)

  • Albert K Tsui

Abstract

The evolution of volatility and correlation patterns of the Malaysian ringgit and the Singapore dollar are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and time-varying correlations of financial time series. Consistent with the results of Tse and Tsui (1997), there is only some weak support for asymmetric volatility in the case of the Malaysian ringgit when the two currencies are measured against the US dollar. However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.

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Paper provided by East Asian Bureau of Economic Research in its series Finance Working Papers with number 22571.

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Date of creation: Jan 2008
Handle: RePEc:eab:financ:22571
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Keywords: Constant correlations; exchange rate volatility; Fractional integration; Long memory; Bivariate asymmetric GARCH; Varying correlations;

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Find related papers by JEL classification:
  • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
  • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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Cited by:

  1. KANTA TANNIYOM & Paponpat Taveeapiradeecharoen & Prapatchon Jariyapan, 2015. "Modeling Dependency and Conditional Volatility between Asian Economic Community (AEC) Country Exchange Rate and Inflation Using the Copula-GARCH Model," Proceedings of International Academic Conferences 2704733, International Institute of Social and Economic Sciences.

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