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

Jose Gomez-Gonzalez () and Wilmer Rojas-Espinosa

Economic Systems, 2019, vol. 43, issue 3

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.

Keywords: Exchange rate contagion; Asian financial crisis; Copula functions; DCC-GARCH models (search for similar items in EconPapers)
JEL-codes: C32 C51 E42 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.ecosys.2019.100717

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Handle: RePEc:eee:ecosys:v:43:y:2019:i:3:s0939362518304023