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On the Dynamic Linkages Among International Emerging Currencies

Zouheir Ahmed Mighri ()

Journal of Quantitative Economics, 2018, vol. 16, issue 2, 427-473

Abstract: Abstract This study examines the interdependence of US dollar exchange rates expressed in five emerging currencies. Focusing on different phases of the global financial and European sovereign debt crises, the aim of this paper is to examine how the dynamics of correlations between emerging exchange markets evolved from January 04, 2000 to July 11, 2014. To this end, we adopt a dynamic conditional correlation model into a multivariate Fractionally Integrated Asymmetric Power ARCH framework, which accounts for long memory, power effects, leverage terms and time varying correlations. The empirical findings indicate a general pattern of decrease in exchange rates correlations across the phases of the global financial crisis and the European sovereign debt crisis, suggesting the depreciation against US dollar and different vulnerability of the currencies. Moreover, our analysis supports the existence of a general pattern of increase in dynamic correlations across several phases of the two crises, indicating the existence of a “contagion effect”.

Keywords: DCC–FIAPARCH; Global financial crisis; European sovereign debt crisis; Exchange rates; Contagion (search for similar items in EconPapers)
JEL-codes: C13 C22 C32 C52 C53 G15 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:spr:jqecon:v:16:y:2018:i:2:d:10.1007_s40953-017-0088-1