Volatility Dependence Across Asia-Pacific Onshore and Offshore Currency Forwards Markets

Abstract:     
This paper estimates switching autoregressive conditional heteroskedasticity (SWARCH) time series models for weekly returns of nine Asian forward exchange rates. We find two regimes with different volatility levels, whereby each regime displays considerable persistence. Our analysis provides evidence that the knock-on effects from China's currency forwards markets upon other Asian countries have been modest, in that little evidence exists for co-dependence of volatility regimes.

Number of Pages in PDF File: 38

Keywords: China, Renminbi, Asia, Forward Exchange Rates, Non-Deliverable Forward Market, SWARCH Models

JEL Classification: C22, F31, F36

working papers series