IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/1998-013.html
   My bibliography  Save this paper

Does the Introduction of Futures on Emerging Market Currencies Destabilize the Underlying Currencies?

Author

Listed:
  • Christian Jochum
  • Ms. Laura E. Kodres

Abstract

Recent interest in futures contracts on emerging market currencies has raised concerns among some central bank authorities about their ability to maintain stable currencies. This paper presents empirical results examining the influence of the Mexican peso, the Brazilian real, and the Hungarian forint futures contracts on the respective spot markets. While measures of linear dependence and feedback indicate strong connections between the respective markets, futures volatility does not significantly explain spot market volatility, nor does it increase after futures introductions. To account for the characteristics of the spot and futures returns a SWARCH model has been employed to estimate volatility.

Suggested Citation

  • Christian Jochum & Ms. Laura E. Kodres, 1998. "Does the Introduction of Futures on Emerging Market Currencies Destabilize the Underlying Currencies?," IMF Working Papers 1998/013, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1998/013
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=2507
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jahangir Sultan, 2012. "Options on federal funds futures and interest rate volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(4), pages 330-359, April.
    2. Calvet, Laurent & Gonzalez-Eiras, Martín & Sodini, Paolo, 2004. "Financial Innovation, Market Participation, and Asset Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(3), pages 431-459, September.
    3. Hou, Yang & Li, Steven, 2014. "The impact of the CSI 300 stock index futures: Positive feedback trading and autocorrelation of stock returns," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 319-337.
    4. Chen, Hongyi & Cao, Shuo, 2019. "Exchange Rate Movements and Fundamentals: Impact of Oil Prices and the People’s Republic of China’s Growth," ADBI Working Papers 938, Asian Development Bank Institute.
    5. Röthig, Andreas, 2004. "Currency futures and currency crises," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 4022, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    6. T. K. Dhaneesh Kumar & B. G. Poornima & P. K. Sudarsan, 2017. "Effectiveness of Currency Futures Market in India: An Empirical Investigation," IIM Kozhikode Society & Management Review, , vol. 6(2), pages 196-203, July.
    7. Tremblay, Rodrigue, 2000. "Les facteurs déclencheurs des crises financières internationales," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(3), pages 423-436, septembre.
    8. Lourdes Treviño, 2005. "Development and volume growth of organized derivatives trade in emerging markets," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 31-82, November.
    9. Philip Turner, 2012. "Summary of the discussion," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial sector regulation for growth, equity and stability, volume 62, pages 141-142, Bank for International Settlements.
    10. Ashish Kumar, 2015. "Impact of Currency Futures on Volatility in Exchange Rate," Paradigm, , vol. 19(1), pages 95-108, June.
    11. Röthig, Andreas, 2004. "Currency Futures and Currency Crises," Darmstadt Discussion Papers in Economics 136, Darmstadt University of Technology, Department of Law and Economics.
    12. Ferry Syarifuddin, 2020. "Macroeconomic Consequences Of Foreign Exchange Futures," Working Papers WP/14/2020, Bank Indonesia.
    13. Rizal A Djaafara, 2011. "Comments on Park and Shin's paper "Internationalisation of currency in East Asia: implications for regional monetary and financial cooperation"," BIS Papers chapters, in: Bank for International Settlements (ed.), Currency internationalisation: lessons from the global financial crisis and prospects for the future in Asia and the Pacific, volume 61, pages 198-201, Bank for International Settlements.
    14. Syarifuddin, Ferry, 2020. "Macroeconomic Consequences of Foreign Exchange Futures Market for Inflation Targeting Economies," MPRA Paper 104810, University Library of Munich, Germany.
    15. Kutan, Ali M. & Shi, Yukun & Wei, Mingzhe & Zhao, Yang, 2018. "Does the introduction of index futures stabilize stock markets? Further evidence from emerging markets," International Review of Economics & Finance, Elsevier, vol. 57(C), pages 183-197.
    16. Kirrane, Chris, 2018. "What Caused the Asian Currency?," MPRA Paper 93643, University Library of Munich, Germany.
    17. Arif Oduncu & Yasin Akcelik & Ergun Ermisoglu, 2013. "Reserve Options Mechanism : A New Macroprudential Tool to Limit the Adverse Effects of Capital Flow Volatility on Exchange Rates," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(3), pages 45-60.
    18. Antoniou, Antonios & Koutmos, Gregory & Pericli, Andreas, 2005. "Index futures and positive feedback trading: evidence from major stock exchanges," Journal of Empirical Finance, Elsevier, vol. 12(2), pages 219-238, March.
    19. Kirrane, Christopher, 2018. "The Causes of Asian Currency Crises," MPRA Paper 89103, University Library of Munich, Germany.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:1998/013. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.