Exchange rate contagion in Latin America |
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| Institution: | 1. Department of Economics, University of Melbourne, Australia;2. Research Unit, Banco de la República (Central Bank of Colombia), Colombia;3. Econometrics Unit, Banco de la República (Central Bank of Colombia), Colombia;1. Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chía, Colombia;2. Inter-American Development Bank, Washington D.C., USA;3. Banco de la República, Bogotá, Colombia;1. Department of Business Administration, Athens University of Economics and Business, 76 Patission Street, GR-10434, Athens, Greece;2. IPAG Business School, 184 Boulevard Saint-Germain, FR-75006, Paris, France;3. Centre for Planning and Economic Research, 11 Amerikis Street, GR-10672, Athens, Greece;5. International School, Vietnam National University, Hanoi;1. Finance & Accounting, Great Lakes Institute of Management, India;2. Finance & Accounting, Indian Institute of Management Tiruchirappalli, India |
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| Abstract: | A regular vine copula approach is implemented for testing for contagion among the exchange rates of the six largest Latin American countries. Using daily data from June 2005 through April 2012, we find evidence of contagion among the Brazilian, Chilean, Colombian and Mexican exchange rates. However, there are interesting differences in contagion during periods of large exchange rate depreciation and appreciation. Our results have important implications for the response of Latin American countries to currency crises originated abroad. |
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| Keywords: | Exchange rates Contagion Copula Regular vine Local correlation |
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