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Journal of Quantitative Economics

, Volume 16, Issue 2, pp 427–473 | Cite as

On the Dynamic Linkages Among International Emerging Currencies

Original Article
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Abstract

This study examines the interdependence of US dollar exchange rates expressed in five emerging currencies. Focusing on different phases of the global financial and European sovereign debt crises, the aim of this paper is to examine how the dynamics of correlations between emerging exchange markets evolved from January 04, 2000 to July 11, 2014. To this end, we adopt a dynamic conditional correlation model into a multivariate Fractionally Integrated Asymmetric Power ARCH framework, which accounts for long memory, power effects, leverage terms and time varying correlations. The empirical findings indicate a general pattern of decrease in exchange rates correlations across the phases of the global financial crisis and the European sovereign debt crisis, suggesting the depreciation against US dollar and different vulnerability of the currencies. Moreover, our analysis supports the existence of a general pattern of increase in dynamic correlations across several phases of the two crises, indicating the existence of a “contagion effect”.

Keywords

DCC–FIAPARCH Global financial crisis European sovereign debt crisis Exchange rates Contagion 

JEL Classification

C13 C22 C32 C52 C53 G15 

Notes

Acknowledgements

I am grateful to an anonymous referees and the editor for many helpful comments and suggestions.

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Copyright information

© The Indian Econometric Society 2017

Authors and Affiliations

  1. 1.Research Laboratory for Economy, Management and Quantitative Finance (LaREMFiQ)IHEC, University of SousseHammam SousseTunisia

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