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In the Shadow of the United States: The International Transmission Effect of Asset Returns

Kuang Liang Chang, Nan-Kuang Chen () and Charles Leung ()

MPRA Paper from University Library of Munich, Germany

Abstract: We examine how the fluctuations in financial and housing markets in U.S. affect the asset returns and GDP in Hong Kong. In contrast to the results from linear specifications, which concludes that the U.S. and Hong Kong are virtually delinked in terms of the asset markets, our regime-switching models indicate that the unexpected shock of US stock returns, followed by the TED spread, has the most significant effect on HK asset returns and GDP, typically in the regime with high return and low volatility. For the in-sample one-step-ahead forecasting, US Term spread stands out to be the best predictor.

Keywords: currency board; fixed nominal exchange rate; international transmission mechanism; hierarchical Markov regime-switching model; vector autoregressive model (search for similar items in EconPapers)
JEL-codes: F40 E30 G10 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-for
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Related works:
Journal Article: In the Shadow of the U nited S tates: The International Transmission Effect of Asset Returns (2013) Downloads
Working Paper: In the shadow of the United States: the international transmission effect of asset returns (2012) Downloads
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