Detecting contagion in Asian exchange rate markets using asymmetric DCC-GARCH and R-vine copulas |
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| Affiliation: | 1. Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chía, Colombia;2. Banco de la República, Bogotá, Colombia;3. Facultad de Economía, Universidad Externado de Colombia, Bogotá, Colombia;1. University of Dubrovnik, Department of Economics and Business Economics, Croatia;2. The Institute of Economics Zagreb, Croatia;1. Universidad de Murcia, Campus Mare Nostrum, Spain;2. Universidad de Murcia, DEcIDE Doctoral Program, Campus Mare Nostrum, Spain;1. Department of Management Sciences, COMSATS Institute of Information Technology, Abbottabad, Pakistan;2. Social Security Research Centre (SSRC), Centre for Poverty and Development Studies (CPDS), Faculty of Economics and Administration (FEA), University of Malaya, Malaysia;1. Faculty of Economics in Subotica, University of Novi Sad, Stevana Hatale 12, 21400, Bačka Palanka, Serbia;2. Novi Sad School of Business, University of Novi Sad, Vladimira Perića Valtera 4, 21000, Novi Sad, Serbia;3. Faculty of Economics in Subotica, University of Novi Sad, Segedinski put 9-11, 24000, Subotica, Serbia;1. Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chia, Colombia;2. Universidad del Valle, Colombia;3. International Monetary Fund, United States |
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| Abstract: | This study uses asymmetric DCC-GARCH models and copula functions to study exchange rate contagion in a group of twelve Asia-Pacific countries. Using daily data between November 1991 and March 2017, we show that extreme market movements are mainly associated with the high degree of interdependence registered by countries in this region. Evidence of contagion is scarce. Asymmetries do not appear to be important. Specifically, currency co-movements are statistically identical during times of extreme market appreciation and depreciation, indicating that phenomena such as the fear of “appreciation” do not appear to be relevant in the region’s foreign exchange markets. |
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| Keywords: | Exchange rate contagion Asian financial crisis Copula functions DCC-GARCH models |
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