Dependence modelling of Malaysian Ringgit (MYR) and Thai Baht (THB): the Markov switching model with dynamic copula approach (DCA) and bivariate extreme value approach

Prasert Chaitip and Chukiat Chaiboonsri

International Journal of Computational Economics and Econometrics, 2016, vol. 6, issue 2, 138-155

Abstract: This research was conducted to identify foreign currencies traded against the US dollar. A research question is how foreign currencies are traded in the case of bivariate extreme values that can bring perfect balance phenomenon and harmony in which the currency is recognised as currency appreciation or depreciation in value. Dependent structure and co-movement between daily data of Malaysian Ringgit (MYR) and Thai Baht (THB) during the period 2006-2013 were investigated. The Akaike information criterion (AIC) and Bayesian information criterion (BIC) straightforward model selection confirmed that the elliptical copula fit for both currencies recognised currency appreciation or depreciation in value. The calculations based on the BEVA demonstrate there is harmonious dependence and balance phenomenon between MYR and THB against the US dollar. Finally, a developed multi-model approach to dependence modelling for variations in the price of a currency known as currency appreciation or depreciation meets the predictable needs of new financial opportunities and policy challenges.

Keywords: Markov switching model; dynamic copula; exchange rate; Thailand; Malaysia; bivariate extreme value; dependence modelling; Malaysian ringgit; Thai baht; foreign currencies; currency trading; US dollar; co-movement; currency appreciation; currency depreciation. (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijcome:v:6:y:2016:i:2:p:138-155

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