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Volatility Transmission between Renminbi and Asia-Pacific on-shore and off-shore U.S. dollar futures

Listed author(s):
  • Roberta Colavecchio

    ()

  • Michael Funke

    ()

This paper uses multivariate GARCH techniques to study volatility spillovers between the Chinese non-deliverable forward market and seven of its Asia-Pacific counterparts over the period January 1998 to March 2005. To account for the time-variability of conditional correlation, a dynamic correlation structure is included in the volatility model specification. The empirical results demonstrate that the renminbi non-deliverable forward (NDF) has been a driver of various Asian currency markets but that such co-movements exhibit a substantial degree of heterogeneity. As to the determinants of the magnitude of these co-movements, we test the relevance of potential factors and find that it is the degree of real and financial integration, in particular, that exerts the largest influence on volatility transmission.

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File URL: http://www.uni-hamburg.de/fachbereiche-einrichtungen/fb03/iwwt/makro/robertaMarch2008.pdf
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Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20803.

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Date of creation: Mar 2008
Handle: RePEc:ham:qmwops:20803
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