scholarly journals Global Volatility Spillover in Asian Financial Markets

2018 ◽  
Vol 9 (2) ◽  
pp. 109-116 ◽  
Author(s):  
Muhammad Ishfaq ◽  
Zhang Bi Qiong ◽  
Awais ur Rehman
Keyword(s):  
Exchange Rate ◽  
Financial Markets ◽  
Market Volatility ◽  
Impulse Response Functions ◽  
Vector Autoregressive ◽  
Volatility Index ◽  
The Usa ◽  
Exchange Markets ◽  
Global Investors ◽  
Exchange Rate Markets

AbstractThe present paper accommodates the spillover impact of market volatility index of S & P 500 (VIX) and China exchange-traded fund’s volatility (VXFXI) on the emerging equity (KSE-100 index) and foreign exchange markets of Pakistan. In this context, we use a vector autoregressive (VAR) model and impulse response functions (IRF) to explore link among VIX indices and financial markets of Pakistan for the differential time periods. The study concludes that a rise in both VIX and VXFXI results in price falls of KSE-100 index and deteriorates exchange rate market. This implies that VIX act as ‘fear gauge’ on both stock and exchange rate markets in Pakistan. These outcomes provide an imperative implication on the pattern of currency and stock sensitivities against global volatility. This reveals that adverse movements in global volatility in the USA and Chinese financial market have a significant impact and a rise in VIX causes an outflow of investment from financial markets of Pakistan. Moreover, our results may guide local and global investors to anticipate the potential direction of stock and exchange rate markets based on market volatility index.

scholarly journals FOREIGN EXCHANGE MARKETS: AN ERROR CORRECTION MODEL ANALYSIS

2009 ◽  
Vol 6 (2) ◽  
Author(s):  
IBM Wiyasha
Keyword(s):  
Exchange Rate ◽  
Structural Stability ◽  
Foreign Exchange ◽  
Foreign Exchange Rate ◽  
Correction Model ◽  
Equilibrium Relationship ◽  
Exchange Markets ◽  
Exchange Rate Markets

This study aims at investigating the behavior of foreign exchange rate markets in Indonesia using 1350 daily observations. Another objective of this study is to examine the structural stability due to Bali bombing chapter I and II. The markets being investigated are USD, AUD, SGD, and YEN; all relative to rupiah. The ECM is applied to investigate the behavior of the markets aforementioned. The findings of this study are that the markets are co integrated and there is a long term equilibrium relationship among them. Using the Chow test, this study finds that there is no structural stability in the markets after Bali bombing chapter I and II.

scholarly journals Determinants of Real Exchange Rate: An analysis from macroeconomic internal factors in Latin American countries

2020 ◽  
Author(s):  
Carlos Chavez
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Latin American ◽  
Impulse Response Functions ◽  
Response Functions ◽  
Vector Autoregressive Model ◽  
Internal Factors ◽  
Macroeconomic Factors ◽  
Vector Autoregressive ◽  
Latin American Countries

Abstract This paper study the macroeconomic factors than explain the real exchange real movements. We use a GMM Panel Vector Autoregressive, propose by Love and Zicchino (2006), for a period 1980-2016, graphs the impulse-response functions and his variance decomposition. We estimate a Vector Autoregressive model for each country. The results are heterogeneous when we compare the results by group and by each country, but we found significance in our variables on real exchange rate.

Granger-causes of the Ringgit-US dollar exchange rate after 2005

2019 ◽  
Vol 12 (1) ◽  
pp. 77-96
Author(s):  
Yoke Yue Kan ◽  
Markus Leibrecht
Keyword(s):  
Exchange Rate ◽  
Composite Index ◽  
Empirical Literature ◽  
Impulse Response Functions ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Financial Conditions ◽  
The Usa ◽  
Short Run ◽  
Prior Literature

Purpose This study aims to investigate Granger-causal relations between the Ringgit-USD exchange rate and selected domestic and international economic variables after the flotation of the Ringgit beginning with 25 July 2005. Design/methodology/approach The study uses lag-augmented vector autoregression (LA-VAR) developed by Toda and Yamamoto (1995) to test for Granger-causality. To visualize short-run dynamics in the Malaysian Ringgit (RM)-USD exchange rate to shocks in predictor variables, generalized impulse-response functions (Pesaran and Shin, 1998) are derived from the estimated LA-VAR models. Findings Results based on LA-VAR generalized impulse responses and data measured in daily frequency indicate strong Granger-causal relationships with the Dow Jones Industrial Average and oil prices. Evidence is also indicative for a causal relationship with the Shanghai Composite Index. Positive shocks in these three variables lead an appreciation of the Ringgit. Practical implications These results provide insights for policymakers in East Asia in their attempt to manage the floating of their currency. Originality/value The paper adds to existing empirical literature in three ways. First, it investigates the RM-USD exchange rate after its managed flotation beginning with 25 July 2005. Second, the study provides results for exchange rates measured in two frequencies, namely, daily and monthly. Third, the empirical LA-VAR model applied includes variables capturing economic and financial conditions in China. Prior literature puts a focus on macroeconomic conditions in the USA. Yet, since 2009, China has been the largest trading partner of Malaysia.

scholarly journals Impact of real exchange rate fluctuations on aggregate cocoa and coffee exports in Sierra Leone

2020 ◽  
Vol 12 (2(J)) ◽  
pp. 34-56
Author(s):  
Pabai Fofanah
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Sierra Leone ◽  
Nominal Exchange Rate ◽  
Regression Result ◽  
Impulse Response Functions ◽  
Vector Autoregressive ◽  
Long Run ◽  
Negative Effect ◽  
Short Run

The regression and the vector autoregressive VAR models have been employed in this analysis. I use the autodistributed lag regression model to estimate both the short and the long-run impacts. In the VAR model, orthogonalized impulse response functions are employed to estimate the short-run. The regression result shows that while depreciation of the RER increases aggregate cocoa and coffee exports AGX in the current year, this variable is not significant in determining AGX in Sierra Leone. This is due to the fact that AGX have long gestation periods and until this period is over, suppliers cannot actually raise their output and hence exports. The negative effect of the one period lag of RER variable on AGX can be attributed to the fact that in the long run, depreciation in the nominal exchange rate leads to real exchange rate depreciation. This will lead to increase in cost of imported farming inputs in domestic currency terms. The reduction in imports that follows decreases the output and hence cocoa and coffee exports. However, this variable is not significant in determining AGX in Sierra Leone. An increase in the orthogonalized shock to the first difference of log RER causes a short series of increases in first difference of log AGX followed by a decrease, followed by an increase that dies out after four periods. The null hypothesis that the lag of first difference of log RER does not Granger-cause the lag of first difference of AGX cannot be rejected. The paper concluded that in the short and long-run, the RER should not be taken as policy variable to influence AGX in Sierra Leone.

scholarly journals Financial markets in CEE countries and their role in transmission of euro area monetary policy shocks

2015 ◽  
Vol 10 (2) ◽  
Author(s):  
Agata Wierzbowska
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Financial Markets ◽  
Simulation Analysis ◽  
Monetary Shocks ◽  
Financial Assets ◽  
Eastern European ◽  
Monetary Policy Shocks ◽  
Policy Shocks ◽  
Exchange Rate Markets

This paper uses the VAR methodology to analyse stock, bond, and exchange rate markets in six Central and Eastern European (CEE) countries. First, we study the influence of shocks occurring in each market on domestic economic conditions. Next, a counterfactual simulation analysis is carried out to discern the role of financial markets in the transmission of European Central Bank (ECB) monetary policy shocks into CEE economies. The results have implications for both present monetary policy-making and future euro adoptions, as well as for investors concerned with financial assets of CEE countries. While examining the estimated responses of domestic output and inflation to changes in stock, bond, and exchange rate prices, we draw conclusions on the relatively lower importance of the bond market and higher importance of stock and exchange rate markets in the economies. The study of transmission channels also points to stock markets as the main channel of transmission, especially in the case of transmission to the output. Transmission of monetary shocks to inflation takes place mainly through stock and exchange rate markets. There is also strong indication on considerable diversity across CEE countries taking place.

scholarly journals Exchange Rate Pass-Through to Prices in Mexico: A Study of the Main Border and Non-Border Cities

2021 ◽  
Vol 16 (2) ◽  
pp. 1-24
Author(s):  
Eduardo Saucedo ◽  
Jorge Gonzalez
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Service Sector ◽  
Consumer Price Index ◽  
Commodity Prices ◽  
Impulse Response Functions ◽  
Vector Autoregressive ◽  
Employment Share ◽  
Pass Through ◽  
Exchange Rate Pass Through

This study analyzes the exchange rate pass-through effect on the Consumer Price Index (CPI) in Mexico's main border and 27 non-border metropolitan cities. The period examined includes monthly data from January 2002 to December 2019. A vector autoregressive model (VAR) is used, which includes formal employment at the city level as a proxy to economic development, interest rates, nominal exchange rates, each analyzed city’s CPI, U.S. consumer prices, energy commodity prices and control variables such as service sector employment share and large firm employment share. Impulse response functions are constructed. Results for the 2002-2016 period indicate that exchange rate changes primarily affect border cities. Different arguments are included to justify such results. Pass-through values are also found to increase in general for all cities when the period 2017-2019 (January 2017 when important gasoline price shocks started previous its price liberalization in December 2017) is included in the regressions.

Interlinkages Between USD–INR, EUR–INR, GBP–INR and JPY–INR Exchange Rate Markets and the Impact of RBI Intervention

2019 ◽  
Vol 18 (1_suppl) ◽  
pp. S102-S136
Author(s):  
Pami Dua ◽  
Ritu Suri
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Jel Classification ◽  
The Other ◽  
Multivariate Garch ◽  
Vector Autoregressive ◽  
Volatility Spillovers ◽  
Exchange Rate Markets ◽  
The Impact

This article examines interlinkages between four major exchange rates, namely, USD–INR, EUR–INR, GBP–INR and JPY–INR in terms of returns and volatility spillovers using a vector autoregressive-multivariate GARCH–BEKK framework. In addition, we analyse the impact of RBI intervention on the returns, volatility and covariance of these exchange rates. The study finds significant bidirectional causality-in-mean and causality-in-variance between all four exchange rates. The estimation results suggest that RBI intervention in the form of net purchase of dollars leads to depreciation of INR vis-à-vis USD, EUR, GBP and JPY. Furthermore, we find that RBI intervention not only significantly affects the volatility of INR vis-à-vis USD, EUR and GBP but also explains significant amount of covariance between USD–INR and the other three exchange rates. JEL Classification: C32, G15, E58, F31

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