Markov switching GARCH models of currency turmoil in Southeast Asia

Celso Brunetti, Chiara Scotti, Roberto Mariano and Augustine H.H. Tan

Emerging Markets Review, 2008, vol. 9, issue 2, 104-128

Abstract: This paper analyzes exchange rate turmoil with a Markov switching GARCH model. We distinguish between two different regimes in both the conditional mean and the conditional variance: "ordinary" regime, characterized by low exchange rate changes and low volatility, and "turbulent" regime, characterized by high exchange rate devaluation and high volatility. We also allow the transition probabilities to vary over time as functions of economic and financial indicators. We find that real effective exchange rates, money supply relative to reserves, stock index returns, and bank stock index returns and volatility contain valuable information for identifying turbulent and ordinary periods.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1566-0141(08)00013-7
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Markov switching GARCH models of currency turmoil in southeast Asia (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:9:y:2008:i:2:p:104-128

Access Statistics for this article

Emerging Markets Review is currently edited by Jonathan A. Batten

More articles in Emerging Markets Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().