Abstract
In this paper, we investigate the “static and dynamic” return and volatility spillovers’ transmission across developed and developing countries. Quoted against the US dollar, we study twenty-three global currencies over the time period 2005–2016. Focusing on the spillover index methodology, the generalised VAR framework is employed. Our findings indicate no evidence of bi-directional return and volatility spillovers between developed and developing countries. However, unidirectional volatility spillovers from developed to developing countries are highlighted. Furthermore, our findings document significant bi-directional volatility spillovers within the European region (Eurozone and non-Eurozone currencies) with the British pound sterling (GBP) and the Euro (EUR) as the most significant transmitters of volatility. The findings reiterate the prominence of volatility spillovers to financial regulators.
Highlights
The increasing financial interdependence, during the current era of global economic events and financial turbulence has prompted considerable interest from market participants and academic research
While much attention has been paid to the magnitude of return and volatility spillovers across global stock markets, little is known about the foreign exchange channels, in particular, the foreign exchange markets’ channels between developed and developing countries
The result indicates that the foreign exchange markets’ channels between develthis section, we present exhibit the results of the net persistence spillovers and theconditional net pairwise spilloped In and developing countries time-varying in its volatilovers between developed countrieswith overthe thespillover time period of findings our sample ities over the crisis period. and Thisdeveloping result is consistent index of
Summary
The increasing financial interdependence, during the current era of global economic events and financial turbulence has prompted considerable interest from market participants and academic research. While much attention has been paid to the magnitude of return and volatility spillovers across global stock markets, little is known about the foreign exchange channels, in particular, the foreign exchange markets’ channels between developed and developing countries. In this paper, we provide results based on extensive empirical analyses, such as the spillover index (both static and dynamic analyses), time-varying net volatility, net volatility, and net pairwise volatility effects. 2021, 14, 270 data used in the analysis and the empirical methodology applied; in Section 5, we provide empirical results, including the robustness and some descriptive statistics; in Section 6, we discuss the time-varying volatility; in Section 7, we introduce the net spillovers and net pairwise volatility spillovers; in Section 8, we provide conclusions; and, we discuss the study limitations and future research Risk Financial Manag. 2021, 14, 270 data used in the analysis and the empirical methodology applied; in Section 5, we provide empirical results, including the robustness and some descriptive statistics; in Section 6, we discuss the time-varying volatility; in Section 7, we introduce the net spillovers and net pairwise volatility spillovers; in Section 8, we provide conclusions; and in Section 9, we discuss the study limitations and future research
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