Measures of Dynamic Connectednesss Based on DCC-GARCH: The Role of Volatility Transmission Mechanisms

13 Pages Posted: 15 Dec 2018 Last revised: 13 Feb 2019

See all articles by David Gabauer

David Gabauer

Johannes Kepler University; Webster University - Webster Vienna Private University

Date Written: November 24, 2018

Abstract

This study introduces volatility impulse response functions (VIRF) for DCC-GARCH models. In addition, the implications with respect to network analysis is illustrated by using the connectedness approach of Diebold and Yılmaz (2014) which rests on VIRFs. The advantage of this framework is that it does not underlie a rolling-window approach. An empirical analysis on the volatility trans- mission mechanism across foreign exchange rate returns is discussed. The findings point out that the CHF and the EUR are net volatility transmitters of shocks whereas the GBP and JPY are net volatility receivers of shocks.

Keywords: DCC-GARCH, Volatility Impulse Response Functions, Dynamic Connectedness, Exchange Rate Volatility

JEL Classification: C32; C58; G15

Suggested Citation

Gabauer, David, Measures of Dynamic Connectednesss Based on DCC-GARCH: The Role of Volatility Transmission Mechanisms (November 24, 2018). Available at SSRN: https://ssrn.com/abstract=3289865 or http://dx.doi.org/10.2139/ssrn.3289865

David Gabauer (Contact Author)

Johannes Kepler University ( email )

Altenbergerstraße 69
Linz, 4040
Austria

Webster University - Webster Vienna Private University ( email )

Praterstraße 23
Vienna, Vienna 1020
Austria

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