Latin American Exchange Rate Dependencies: A Regular Vine Copula Approach

Rubén Loaiza Maya and Luis Melo-Velandia

No 9902, Borradores de Economia from Banco de la Republica

Abstract: This study implements a regular vine copula methodology to evaluate the level of contagion among the exchange rates of six Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico and Peru) from June 2005 to April 2012. We measure contagion in terms of tail dependence coefficients, following Fratzscher´s [1999] definition of contagion as interdependence.Our results indicate that these countries are divided into two blocs. The first bloc consists of Brazil, Colombia, Chile and Mexico, whose exchange rates exhibit the largest dependence coefficients, and the second bloc consists of Argentina and Peru, whose exchange rate dependence coefficients with other Latin American countries are low. We also found that most of the Latin American exchange rate pairs exhibit asymmetric behaviors characterized by non-significant upper tail dependence and significant lower tail dependence. These results imply that there exists contagion in Latin American exchange rates in periods of large appreciations

Keywords: Copula; Regular Vine; Exchange Rates; Tail Dependence Coefficients. (search for similar items in EconPapers)
JEL-codes: C32 C51 E42 (search for similar items in EconPapers)
Pages: 21
Date: 2012-08-23
New Economics Papers: this item is included in nep-lam and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: LATIN AMERICAN EXCHANGE RATE DEPENDENCIES: A REGULAR VINE COPULA APPROACH (2015)
Working Paper: Latin American Exchange Rate Dependencies: A Regular Vine Copula Approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:009902

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