Volatility spillover effects in foreign exchange markets among China, Japan, and South Korea

Bok-Keun Yu and Kwon Sik Kim

KDI Journal of Economic Policy, 2026, vol. 48, issue 2, 89-109

Abstract: This paper analyzes the dynamic spillover effects of exchange rate volatility among the foreign exchange markets of China, Japan, and South Korea from January of 2010 to March of 2024 based on exchange rate determination theories, the GJR-GARCH model, and the TVP-VAR model. The key empirical results are as follows. First, while the factors determining the CNY/USD, JPY/USD, and KRW/USD exchange rates are somewhat different, it was found that CNY/USD is influenced by the short-term interest rate differential with the U.S., JPY/USD is affected by the VIX and by a COVID-19 dummy, and KRW/USD is impacted by the difference in the money supply change rate with the U.S. and the VIX. Second, the exchange rate volatility of the three currencies was found to exhibit the well-known persistence and leverage effects. Third, regarding the time-varying spillover effects of exchange rate volatility between the three countries' foreign exchange markets, the transmission effects of exchange rate volatility between the three countries varied with the timing, frequency, and persistence.

Keywords: Volatility Spillover; Foreign Exchange Rate; GJR-GARCH; TVP-VAR (search for similar items in EconPapers)
JEL-codes: E40 E50 F30 G15 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/341454/1/1972968076.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdijep:341454

DOI: 10.23895/KDIJEP.2026.48.2.89

Access Statistics for this article

KDI Journal of Economic Policy is currently edited by Dongseok Kim

More articles in KDI Journal of Economic Policy from Korea Development Institute (KDI) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().