 Does the Introduction of Futures on Emerging Market Currencies Destabilize the Underlying Currencies?Christian Jochum and Laura Kodres No 1998/013, IMF Working Papers from International Monetary Fund Abstract: Recent interest in futures contracts on emerging market currencies has raised concerns among some central bank authorities about their ability to maintain stable currencies. This paper presents empirical results examining the influence of the Mexican peso, the Brazilian real, and the Hungarian forint futures contracts on the respective spot markets. While measures of linear dependence and feedback indicate strong connections between the respective markets, futures volatility does not significantly explain spot market volatility, nor does it increase after futures introductions. To account for the characteristics of the spot and futures returns a SWARCH model has been employed to estimate volatility. Keywords: WP; Mexican peso; exchange rate; futures volatility; emerging market; volatility spillover; emerging markets; SWARCH; spot market volatility; futures FX; currency futures futures contract; Futures markets; Futures; Currencies; Emerging and frontier financial markets; Currency markets; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1998/013 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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