The Asia financial crises and exchange rates: Had there been volatility shifts for Asian currencies?

Abstract

We analyse the volatility structure of Asian currencies against the U.S. dollar (USD) for the Thai Baht THB, the Philippine Peso PHP, the Indonesian Rupiah IDR and the South KoreanWon KRW. Our goal is to check if the characteristics of the volatility dynamics have changed in a K-state AR(1)-GARCH(1,1)model in the last decade 1995-2008 covering the Asian crisis. We estimate the model of Haas et al. (2003) with MCMC and we find that for the four currencies the volatility dynamics has changed at least once. © Springer-Verlag Berlin Heidelberg 2010.