• East Asian Economic Review
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• v.17 no.3
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• pp.311-332
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• 2013

This paper examines the effect of initial margin requirements on long-run and short-run volatilities in the Japanese stock market using the Component GARCH model. Our empirical results show that when we do not divide the margin requirement into positive and negative changes, increasing margin requirement is effective for reducing long-run volatility, while not effective in short-run volatility. However, separating the positive and negative changes in margin requirements reveals the fact that the negative changes in margin requirements decrease long-run volatilities, while the higher margin requirements increase short-run volatilities in the Japanese stock market. This suggests that if the Japanese financial authorities intend to increase margin level to reduce volatility, unexpectedly, short-run volatility would be even higher.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.8
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• pp.41-49
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• 2020

This study investigates the short-run and long-run causal behavior of the Philippine stock market index volatility under vector error correction environment. The variables were tested first for stationarity and then long-run equilibrium relationship. Moreover, an impulse response function was estimated to examine the extent of innovations in the independent variables in explaining the Philippine stock market index volatility. The results reveal that the volatility of the Philippine stock market index exhibit long-run equilibrium relationship with Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil prices. The short-run dynamics-based VECM estimates indicate that in the short-run, increases (i.e., depreciation) in Peso-Dollar exchange rate cause PSEI volatility to increase. As for the London Interbank Offered Rate, it causes increases in PSEI volatility in the short-run. The adjustment coefficients used with the long-run dynamics validates the presence of unidirectional causal long-run relationship from Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil prices to PSEI volatility, and bidirectional causal long-run relationship between PSEI volatility and London Interbank Offered Rate. The impulse response functions developed within the VECM framework demonstrate the positive and negative reactions of PSEI volatility to unanticipated Peso-Dollar exchange rate, London Interbank Offered Rate, and crude oil price shocks.

• Environmental and Resource Economics Review
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• v.11 no.3
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• pp.397-414
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• 2002

This paper presents an empirical analysis of exchange rate volatility, petroleum's import price and industrial production on petroleum imports. The GARCH framework is used to measure the exchange rate volatility. One of the most appealing features of the GARCH model is that it captures the volatility clustering phenomenon. We found one long-run relationship between petroleum imports, import price, industrial production, and exchange rate volatility using Johansen's multivariate cointegration methodology. Since there exists a cointegrating vector, therefore, we employ an error correction model to examine the short-run dynamic linkage, finding that the exchange rate volatility performs a key role in the short-run. This paper also apply impulse-response functions to provide the dynamic responses of energy consumption to the exchange rate volatility. The results show that the response of energy consumption to exchange rate volatility declines at the first month and dies out very quickly.

• The Journal of Asian Finance, Economics and Business
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• v.9 no.10
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• pp.49-59
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• 2022

This paper examined the impact of real exchange rate volatility on trade balance in Malaysia by using quarterly data from year 2000 until 2019. Generalized Autoregressive Heteroscedasticity (GARCH) model was used to extract the volatility component of real exchange rate before examining its impact on trade balance. Furthermore, Autoregressive Distributed Lag (ARDL) model was used to investigate the long-run relationship and short-run dynamic between trade balance, money supply, national income and volatility of exchange rate. Empirical results show the existence of co-movement between variables under study in the long-run. However, the results also suggest that volatility of real exchange rate does not significantly affect trade balance neither in the long-run nor short-run. The risk which is associated in the movement of exchange rate do not influence trader's behaviour toward Malaysia exports and imports. Thus, it should be note that any depreciation or appreciation in Malaysian Ringgit do not have an impact towards trade balance either it is being further improved or deteriorates. Hence, exchange rate volatility may not be too concern for policymakers. This may be partially due to manage floating exchange rate regime that has been adopted by Malaysia eventually eliminated the element of risk in the currency market.

• East Asian Journal of Business Economics (EAJBE)
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• v.6 no.3
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• pp.24-36
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• 2018

Purpose - From establishing China-Japan diplomatic relations in 1972, the relations between two states has improved a lot, from which makes the government and the people reap much benefit. Owing to this reason, this paper aims at exploiting the impact of exchange rate volatility of RMB on China's foreign direct investment to Japan. Research design and methodology - The quarterly time series data from 2003 to 2016 will be employed to conduct an empirical analysis under the vector error correction model. Meanwhile, a menu of estimated methods such the Johansen co-integration test and the Granger Causality test will be also used to explore the impact of exchange rate volatility of RMB on China's foreign direct investment to Japan. Results - The empirical analysis results exhibit that the real exchange rate has a positive effect on China's foreign direct investment to Japan in the long run. Conversely, the real exchange rate volatility of RMB, the trade openness and the real GDP have a negative effect on China's foreign direct investment to Japan in the long run. However, in the short run, the China's foreign direct investment to Japan, the real exchange rate, the trade openness and the real GDP in period have a negative effect on China's foreign direct investment to Japan in period. Oppositely, the real exchange rate volatility of RMB in period has a positive effect on China's foreign direct investment to Japan in period. Conclusions - From the empirical evidences in this paper provided, it can be concluded that an increase in the exchange rate volatility of RMB can result in a decrease in the China's foreign direct investment to Japan in the long run. However, an increase in the exchange rate volatility of RMB can lead to an increase in the China's foreign direct investment to Japan in the short run. Therefore, the China's government should have a best control of the real exchange rate volatility of RMB so as to improve China's foreign direct investment to Japan.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.1
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• pp.23-36
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• 2021

The study explores the nexus between foreign direct investment (FDI), financial innovation, and exchange rate volatility in selected South Asian countries for 1980 to 2017. The study applies the unit root test, Autoregressive Distributed Lagged, nonlinear ARDL, and causality test following Toda-Yamamoto. Unit root tests ascertain that variables are integrated in a mixed order; few variables are stationary at a level and few after the first difference. Empirical model estimation with ARDL, Long-run cointegration revealed with the tests of FPSS, WPSS, and tBDM by rejecting the null hypothesis of "no cointegration." This finding suggests that, in the long-run financial innovation, FDI inflows, and exchange rate volatility move together. Moreover, study findings established adverse effects running from FDI inflows and financial innovation to exchange rate volatility in the long run. These findings suggest that continual FDI inflows and innovativeness in the financial system assist in lessening the volatility in the foreign exchange market. Furthermore, nonlinear ARDL confirms the presence of asymmetric cointegration in the model. The standard Wald test established asymmetric effects running from FDI inflows and financial innovation to exchange rate volatility, both in the long and short run. Directional causality unveils feedback hypothesis holds for explaining causality between FDI, financial innovation, and exchange rate volatility.

• KDI Journal of Economic Policy
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• v.40 no.4
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• pp.1-22
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• 2018

We estimate three continuous-time stochastic volatility models following the approach by Aït-Sahalia and Kimmel (2007) to compare the Korean and US stock markets. To do this, the Heston, GARCH, and CEV models are applied to the KOSPI 200 and S&P 500 Index. For the latent volatility variable, we generate and use the integrated volatility proxy using the implied volatility of short-dated at-the-money option prices. We conduct MLE in order to estimate the parameters of the stochastic volatility models. To do this we need the transition probability density function (TPDF), but the true TPDF is not available for any of the models in this paper. Therefore, the TPDFs are approximated using the irreducible method introduced in Aït-Sahalia (2008). Among three stochastic volatility models, the Heston model and the CEV model are found to be best for the Korean and US stock markets, respectively. There exist relatively strong leverage effects in both countries. Despite the fact that the long-run mean level of the integrated volatility proxy (IV) was not statistically significant in either market, the speeds of the mean reversion parameters are statistically significant and meaningful in both markets. The IV is found to return to its long-run mean value more rapidly in Korea than in the US. All parameters related to the volatility function of the IV are statistically significant. Although the volatility of the IV is more elastic in the US stock market, the volatility itself is greater in Korea than in the US over the range of the observed IV.

• Journal of Korea Port Economic Association
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• v.23 no.1
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• pp.1-18
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• 2007

The purpose of this study is to examine the effect of exchange rate volatility on Trading Volume of Container of Korea, and to induce policy implication in the contex of GARCH and regression model. In order to test whether time series data is stationary and the model is fitness or not, we put in operation unit root test, cointegration test. And we apply impulse response functions and variance decomposition to the structural model to estimate dynamic short run behavior of variables. The major empirical results of the study show that the increase in exchange rate volatility exerts a significant negative effect on Trading Volume of Container in long run. The results Granger causality based on an error correction model indicate that uni-directional causality between trading volume of container and exchange rate volatility is detected. This study applies impulse response function and variance decompositions to get additional information regarding the Trading Volume of Container to shocks in exchange rate volatility. The results indicate that the impact of exchange rate volatility on Trading Volume of Container is negative and converges on a stable negative equilibrium in short-run. Th exchange rate volatility have a large impact on variance of Trading Volume of Container, the effect of exchange rate volatility is small in very short run but become larger with time. We can infer policy suggestion as follows; we must make a stable policy of exchange rate to get more Trading Volume of Container

• Environmental and Resource Economics Review
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• v.28 no.4
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• pp.583-615
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• 2019

This paper investigates the level of decoupling between greenhouse gas emissions and economic growth in Korea. Despite previous studies mainly stressed the existence of the Environmental Kuznets Curve, the lack of investigations in the level of decoupling constraints further policy suggestions. This study analyzes the level of decoupling in the short- and long-term, focusing on short-term volatility of GHG emissions income elasticity. In the long run, there is no decoupling in Korea because a robust causal relationship exists between GHGs, GDP, and fossil fuels. However, the short-term volatility is clearly identified under the long-term equilibrium(coupling), indicating there is the relative decoupling in the short run. The results show that fossil fuel dependence is a significant factor that increases short-term volatility(decoupling) and breaks the causal link(coupling) between GHGs and GDP.

• The Journal of Fisheries Business Administration
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• v.32 no.1
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• pp.1-14
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• 2001

The research on the price-volume relation in the market is very important because it examines into regular phenomenon revealed by market participants including producers and middlemen. The purpose of this study is to investigate the relationship between price and trading volume in the oyster producing market. In order to accomplish the purpose of this study, the contents of empirical analysis include the time series properties of price and trading volume, the short-term and long-term relationships between price and trading volume, and the determinants of trading volume. The data used in this study correspond to daily price and trading volume covering the time period from January 1998 to April 2001. The empirical results can be summarized as follows : First, price and trading volume follow random walks and they are integrated of order 1. The first difference is necessary for satisfying the stationary conditions. Second, price and trading volume are cointegrated. This long-run relationship is stronger from trading volume to price. Third, error correction model suggests that feedback effect exists in the long-run and that price tends to lead trading volume by about five days in the short run, that is, to be required period by digging, conveying, and peeling oystershell for selling oyster. Fourth, price and price volatility is a determinant of trading volume. In particular, trading volume is a negative function of price. It is believed that the conclusion drawn from this study would provide a useful standard for the policy makers in charge of reducing the oyster price volatility risk caused by trading volume(selling quantities).