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
Date Written: November 24, 2018
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: Suggested Citation