Liquidity spillover in foreign exchange markets
Yin-Feng Gau and
Finance Research Letters, 2022, vol. 44, issue C
We use an index of spillover based on the generalized variance decomposition developed by Diebold and Yilmaz (2009, 2012) to measure the spillover in liquidity in currency markets between 2008 and 2015. The results show that the liquidity spillovers across nine major foreign exchange markets increase with global risk and funding constraint. We also find a substantial difference in the propagation pattern of liquidity between the funding currencies and investment currencies markets.
Keywords: Liquidity spillovers; European debt crisis; Global financial crisis; Market risk (search for similar items in EconPapers)
JEL-codes: C22 F31 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001860
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