What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets

This paper asks whether the 'leverage effect -as defined by Black (1976) for stock markets- is also a characteristic of foreign exchange markets. The study focuses on five Latin American emerging markets which have adopted a floating exchange regime. It finds that the response of exchange rates...

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Autores principales:	MAYA,CECILIA, GÓMEZ,KAROLL
Lenguaje:	English
Publicado:	Instituto de Economía, Pontificia Universidad Católica de Chile 2008
Materias:	Exchange Rate Volatility Leverage Effect Asymmetric Volatility GARCH HYAPARCH
Acceso en línea:	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212008000200001
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spelling	oai:scielo:S0717-682120080002000012009-03-11What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American MarketsMAYA,CECILIAGÓMEZ,KAROLL Exchange Rate Volatility Leverage Effect Asymmetric Volatility GARCH HYAPARCH This paper asks whether the 'leverage effect -as defined by Black (1976) for stock markets- is also a characteristic of foreign exchange markets. The study focuses on five Latin American emerging markets which have adopted a floating exchange regime. It finds that the response of exchange rates to volatility shocks is characterized by long memory and symmetry in most countries. The response is asymmetric only in Brazil and Peru. A possible explanation for this asymmetry is the fear of floating' that induces side-effects on interest rates and inflation, which the market considers 'bad news'. The opposite direction of the asymmetry may be explained by the particular characteristics of each economy.info:eu-repo/semantics/openAccessInstituto de Economía, Pontificia Universidad Católica de ChileCuadernos de economía v.45 n.132 20082008-11-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212008000200001en10.4067/S0717-68212008000200001
institution	Scielo Chile
collection	Scielo Chile
language	English
topic	Exchange Rate Volatility Leverage Effect Asymmetric Volatility GARCH HYAPARCH
spellingShingle	Exchange Rate Volatility Leverage Effect Asymmetric Volatility GARCH HYAPARCH MAYA,CECILIA GÓMEZ,KAROLL What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
description	This paper asks whether the 'leverage effect -as defined by Black (1976) for stock markets- is also a characteristic of foreign exchange markets. The study focuses on five Latin American emerging markets which have adopted a floating exchange regime. It finds that the response of exchange rates to volatility shocks is characterized by long memory and symmetry in most countries. The response is asymmetric only in Brazil and Peru. A possible explanation for this asymmetry is the fear of floating' that induces side-effects on interest rates and inflation, which the market considers 'bad news'. The opposite direction of the asymmetry may be explained by the particular characteristics of each economy.
author	MAYA,CECILIA GÓMEZ,KAROLL
author_facet	MAYA,CECILIA GÓMEZ,KAROLL
author_sort	MAYA,CECILIA
title	What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
title_short	What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
title_full	What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
title_fullStr	What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
title_full_unstemmed	What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets
title_sort	what exactly is 'bad news' in foreign exchange markets?: evidence from latin american markets
publisher	Instituto de Economía, Pontificia Universidad Católica de Chile
publishDate	2008
url	http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0717-68212008000200001
work_keys_str_mv	AT mayacecilia whatexactlyisbadnewsinforeignexchangemarketsevidencefromlatinamericanmarkets AT gomezkaroll whatexactlyisbadnewsinforeignexchangemarketsevidencefromlatinamericanmarkets
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What Exactly is 'Bad News' in Foreign Exchange Markets?: Evidence from Latin American Markets

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