Effect of exchange rate return on volatility spill-over across trading regions

Don Galagedera and Yoshihiro Kitamura ()

Japan and the World Economy, 2012, vol. 24, issue 4, 254-265

Abstract: This paper examines the effect of realized exchange rate returns on the volatility spill-over between the euro–US dollar and US dollar–yen currency pairs across the five trading regions: Asia, Asia–Europe overlap, Europe, Europe–America overlap and America. Modelling the interaction between returns and volatility in an autoregressive five-equation system, we find evidence that depreciation of the US dollar against the yen has a greater impact on the US dollar–yen volatility spill-over than appreciation in the subprime crisis period. Appreciation and depreciation of the US dollar against the euro does not appear to have an asymmetric effect on the euro–US dollar volatility spill-over. Our results support the notion that the yen may have been preferred to the euro as a ‘safe-haven’ currency relative to the US dollar during the subprime crisis period.

Keywords: Exchange rate; Volatility spill-over; High-frequency data (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:24:y:2012:i:4:p:254-265

DOI: 10.1016/j.japwor.2012.07.003

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