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Volatility Spillovers in East Asian Financial Markets: A Mem-Based Approach

Robert F. Engle1; Giampiero M. Gallo2; Margherita Velucchi2

1 New York University · 2 University of Florence

The Review of Economics and Statistics 2012 open access

We model the interrelations of equity market volatility in eight East Asian countries before, during, and after the Asian currency crisis. Using a new class of asymmetric volatility multiplicative error models based on the daily range, we find that dynamic propagation of volatility shocks occurs through a network of interdependencies, and shocks originating in Hong Kong may be amplified in their transmission throughout the system, posing greater risks to the region than shocks originating elsewhere. Although this partly explains the severity of the currency crisis, we also find evidence that parameters shifted, making the system more unstable during the crisis.

DOI
10.1162/rest_a_00167
Volume
94 (1)
Pages
222-223
Language
en
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