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The asymmetric effects of U.S. large-scale asset purchases on the volatility of the Canadian dollar futures market

Jui-Chuan Della Chang and Kuang-Liang Chang

The North American Journal of Economics and Finance, 2018, vol. 46, issue C, 15-28

Abstract: This paper investigates the asymmetric effects of U.S. large-scale asset purchases on the volatility of the Canadian dollar futures market. This approach is innovative in so far as it examines the effects of allowing two-round impacts to differ in our settings of dynamic volatility with time-varying jump intensity because the world economic situation differs during periods of large-scale asset purchases. Utilizing the daily futures price of the exchange rate for the Canadian dollar against the U.S. dollar, the empirical findings show that U.S. large-scale asset purchases have significant asymmetric effects on the volatility of the Canadian dollar futures market. Two kinds of asymmetry are observed. Firstly, the impact of large-scale asset purchases is smaller in the first round of the large-scale asset purchases than in the second round. Secondly, an expansionary policy causes higher volatility in the Canadian dollar futures market than does a contractionary policy due to a signal of high liquidity.

Keywords: Quantitative easing; Jump intensity; Canadian dollar futures market (search for similar items in EconPapers)
JEL-codes: E44 E52 G15 C58 (search for similar items in EconPapers)
Date: 2018
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