The Sovereign Risk of Official Intervention: the Volatility Relationship between EUD and RMB

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Title:	The Sovereign Risk of Official Intervention: the Volatility Relationship between EUD and RMB
Authors:	李沃牆;Lee, Wo-chiang;方鏘傑;Fang, Chiang-jye
Contributors:	淡江大學財務金融學系
Keywords:	Exchange Rate;Copula;ARMAX-GJR-GARCH
Date:	2011-07
Issue Date:	2011-12-21 11:28:23 (UTC+8)
Publisher:	Mahe: EuroJournals Publishing
Abstract:	We provide new evidence regarding the shock effects of the PBC intervention in the FX market by comparing the volatility of exchange rate of Euro dollar (EUD) and Chinese Ranminbi (RMB) against the US dollar (USD) and showing policy interference of Chinese the exchange rate system. Firstly we model the ARMAX-GJR-GARCH equation to reexamine interest parity theory and find the structure break of the exchange rate of the RMB then we set up our new Copula-ARMAX-GJR-GARCH model by using daily exchange rate of EUD and RMB against USD during the period from January 2005 to March 2010. The result provides the very important information that we prove the sovereign risk of official intervention and political influence economy. Our new research also contributes to examine a discrepancy between the exchange rate system of EU and China for risk managers in financial institutions.
Relation:	International Research Journal of Finance and Economics 69, pp.7-18
Appears in Collections:	[Graduate Institute & Department of Banking and Finance] Journal Article

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