Global Volatility and Forex Returns in East Asia

33 Pages Posted: 12 Sep 2008

See all articles by Sanjay Kalra

Sanjay Kalra

International Monetary Fund (IMF) - Asia and Pacific Department

Date Written: September 2008

Abstract

During 2001-07, increases in mature market volatility were associated with declines in forex returns for East Asian countries, consistent with an overall "flight to safety" effect. Estimates from GARCH models suggest that a 5 percentage point increase in mature market equity volatility generated an exchange rate depreciation of up to ½ percent. This sensitivity rose during the latter period in the sample, suggesting greater integration of Asian financial markets with global markets. Unconditional standard deviations estimated from these models also provide operational measures of "long-term" and "excess" volatility in forex markets. Long-run forex volatility declined as Asian economies settled down with generally stronger fundamentals in the post-crisis period to more flexible regimes along with a generally lower level of mature market volatility.

Keywords: Foreign exchange, East Asia, Exchange rates, Financial stability, Economic integration, Economic models, Financial crisis, Working Paper

Suggested Citation

Kalra, Sanjay, Global Volatility and Forex Returns in East Asia (September 2008). IMF Working Paper No. 08/208, Available at SSRN: https://ssrn.com/abstract=1266541

Sanjay Kalra (Contact Author)

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
203
Abstract Views
1,620
Rank
293,386
PlumX Metrics