VOLATILITY DYNAMICS IN FOREIGN EXCHANGE RATES: FURTHER EVIDENCE FROM THE MALAYSIAN RINGGIT AND SINGAPORE DOLLAR

Kin-Yip Ho and Albert Tsui
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Kin-Yip Ho: Faculty of Business and Enterprise, Swinburne University of Technology, Australia

Annals of Financial Economics (AFE), 2008, vol. 04, issue 01, 1-27

Abstract: The evolution of volatility and correlation patterns of the Malaysian ringgit (MYR) and the Singapore dollar (SGD) are analyzed in this paper. Our approach can simultaneously capture the empirical regularities of persistent and asymmetric effects in volatility and time-varying correlations of financial time series. Consistent with the results of (1997), there is only some weak support for asymmetric volatility in the case of the MYR when the two currencies are measured against the US dollar (USD). However, there is strong evidence that depreciation shocks have a greater impact on future volatility levels compared with appreciation shocks of the same magnitude when both currencies measured against the yen. Moreover, evidence of time-varying correlation is highly significant when both currencies are measured against the yen. Regardless of the choice of the numeraire currency and the volatility models, shocks to exchange rate volatility are found to be significantly persistent.

Keywords: Constant correlations; exchange rate volatility; fractional integration; long memory; bivariate asymmetric GARCH; varying correlations; C12; G15 (search for similar items in EconPapers)
Date: 2008
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Working Paper: Volatility Dynamics in Foreign Exchange Rates: Further Evidence from the Malaysian Ringgit and Singapore Dollar (2008)
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DOI: 10.1142/S2010495208500048

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