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Detecting contagion in Asian exchange rate markets using asymmetric DCC-GARCH and R-vine copulas

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  • Gomez-Gonzalez, Jose E.
  • Rojas-Espinosa, Wilmer

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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  • Gomez-Gonzalez, Jose E. & Rojas-Espinosa, Wilmer, 2019. "Detecting contagion in Asian exchange rate markets using asymmetric DCC-GARCH and R-vine copulas," Economic Systems, Elsevier, vol. 43(3).
    • Handle: RePEc:eee:ecosys:v:43:y:2019:i:3:s0939362518304023
    DOI: 10.1016/j.ecosys.2019.100717
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    Cited by:

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    7. Jose Eduardo Gomez‐Gonzalez & Julian Andres Parra‐Polania & Mauricio Villamizar‐Villegas, 2021. "More than words: Foreign exchange intervention under imperfect credibility," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 499-507, October.
    8. Sevda Kuşkaya & Nurhan Toğuç & Faik Bilgili, 2022. "Wavelet coherence analysis and exchange rate movements," Quality & Quantity: International Journal of Methodology, Springer, vol. 56(6), pages 4675-4692, December.
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    More about this item

    Keywords

    Exchange rate contagion; Asian financial crisis; Copula functions; DCC-GARCH models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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