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Volatility Dynamics In Foreign Exchange Rates: Further Evidence From The Malaysian Ringgit And Singapore Dollar

Author

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  • KIN-YIP HO

    (Faculty of Business and Enterprise, Swinburne University of Technology, Australia)

  • ALBERT K TSUI

    (Department of Economics, National University of Singapore, AS2 Level 6, 1 Arts Link, Singapore 117570, Singapore)

Abstract

The evolution of volatility and correlation patterns of the Malaysian ringgit (MYR) and the Singapore dollar (SGD) are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and time-varying correlations of financial time series. Consistent with the results of (1997), there is only some weak support for asymmetric volatility in the case of the MYR when the two currencies are measured against the US dollar (USD). However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.

Suggested Citation

  • Kin-Yip Ho & Albert K Tsui, 2008. "Volatility Dynamics In Foreign Exchange Rates: Further Evidence From The Malaysian Ringgit And Singapore Dollar," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-27.
    • Handle: RePEc:wsi:afexxx:v:04:y:2008:i:01:n:s2010495208500048
    DOI: 10.1142/S2010495208500048
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    References listed on IDEAS

    as
    1. Engle, Robert F & Sheppard, Kevin K, 2001. "Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH," University of California at San Diego, Economics Working Paper Series qt5s2218dp, Department of Economics, UC San Diego.
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    Cited by:

    1. KANTA TANNIYOM & Paponpat Taveeapiradeecharoen & Prapatchon Jariyapan, 2015. "Modeling Dependency and Conditional Volatility between Asian Economic Community (AEC) Country Exchange Rate and Inflation Using the Copula-GARCH Model," Proceedings of International Academic Conferences 2704733, International Institute of Social and Economic Sciences.

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    More about this item

    Keywords

    Constant correlations; exchange rate volatility; fractional integration; long memory; bivariate asymmetric GARCH; varying correlations; C12; G15;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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