Multivariate GARCH Modeling of Exchange Rate Volatility Transmission in the European Monetary System

Posted: 18 Feb 2000

See all articles by Colm Kearney

Colm Kearney

Monash University - Monash Business School

Andrew J. Patton

Duke University - Department of Economics

Abstract

We construct a series of 3-, 4- and 5-variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979?March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission.

JEL Classification: F31

Suggested Citation

Kearney, Colm and Patton, Andrew J., Multivariate GARCH Modeling of Exchange Rate Volatility Transmission in the European Monetary System. Available at SSRN: https://ssrn.com/abstract=204750

Colm Kearney (Contact Author)

Monash University - Monash Business School ( email )

Sir John Monash Drive
Caulfield
Melbourne, Victoria 3168
Australia
+353399031021 (Phone)

Andrew J. Patton

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

HOME PAGE: http://econ.duke.edu/~ap172/

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