Evaluating the volatility spillovers in the foreign exchange market during extreme events from 2007 to 2022 using the EGARCH model: Evidence from the ASEAN-5 countries

• Main Authors: Diaz, Helen L., Ignacio, Jan Peter T., Namol, Melanie Grace V., So, Abby Gail C.
• Format: text
• Language: English
• Published: Animo Repository 2023
• Subjects: Stock exchanges and current events—Southeast Asia; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etdb_finman/60; https://animorepository.dlsu.edu.ph/context/etdb_finman/article/1059/viewcontent/Evaluating2_The_Volatility_Spillovers_In_The_Foreign_Exchange_Mark.pdf
• Institution: De La Salle University

This paper evaluated the volatility spillovers in the foreign exchange market of the ASEAN-5 countries, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand, during extreme events such as the Global Financial Crisis, Post-Global Financial Crisis, COVID-19 Pandemic, and the 2022 US Inflationary Period. The study covered daily foreign exchange rates from 2007 to 2022. In analyzing the data, the researchers utilized various statistical methods such as descriptive statistics, Augmented Dickey-Fuller, Philipps Perron, ARCH LM, Weighted Ljung-Box test, EGARCH model, Value-at-Risk, and ANOVA. These methods identified whether significant volatility spillovers occurred in the ASEAN-5 foreign exchange markets during the extreme events. The study determined that during the extreme events, USD/IDR showed the highest volatility spillover. In contrast, USD/SGD showcased the lowest volatility spillover except for the 2022 US Inflationary period, wherein USD/MYR had the lowest volatility spillover. On the other hand, the Global Financial Crisis had the highest value-at-risk, indicating that the highest potential losses were found during that period. The findings of the study can be utilized by the financial sector participants, allowing them to identify the direction of relationships between the volatility spillover of the currency pairs in ASEAN. With that knowledge, the participants can better forecast future movements of the foreign exchange markets, allowing them to prepare and adjust their strategies accordingly with their foreign exchange market investments, limiting the risks incurred.