Proceedings of the 5th International Conference on Economics, Management, Law and Education (EMLE 2019)

Regime-Switching Foreign Exchange Rate Exposures of the Asian Emerging Markets

Authors
Chunhuang Liao
Corresponding Author
Chunhuang Liao
Available Online 7 January 2020.
DOI
10.2991/aebmr.k.191225.041How to use a DOI?
Keywords
exchange rate exposure, threshold, VIX, interest rate spread, PSTR-ECM
Abstract

The purpose of this study is to improve the traditional linear measuring framework of market-level foreign exchange rate exposure by considering the long-run cointegration relationship with error correction and panel smooth transition function to show the short-run nonlinear regime-switching feature of exposure. The unique feature of the nonlinear exposure model in this paper in contrast to previous studies is that the exposure is measured under the framework of PSTR-ECM with consideration of linking the stock, the exchange rate, and the interest rate together by introducing transition variable which represents investors’ expectation of the financial markets. Three alternative transition variables were considered, including the CBOE Volatility Index, the long-run and short-run interest rate spread of US bonds, and that of China bonds, respectively. Finally, it is found that the Asian emerging markets face parity risks of regime-switching foreign exchange rate exposures against the USD and the CNY.

Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the 5th International Conference on Economics, Management, Law and Education (EMLE 2019)
Series
Advances in Economics, Business and Management Research
Publication Date
7 January 2020
ISBN
978-94-6252-878-9
ISSN
2352-5428
DOI
10.2991/aebmr.k.191225.041How to use a DOI?
Copyright
© 2020, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

TY  - CONF
AU  - Chunhuang Liao
PY  - 2020
DA  - 2020/01/07
TI  - Regime-Switching Foreign Exchange Rate Exposures of the Asian Emerging Markets
BT  - Proceedings of the 5th International Conference on Economics, Management, Law and Education (EMLE 2019)
PB  - Atlantis Press
SP  - 232
EP  - 239
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.191225.041
DO  - 10.2991/aebmr.k.191225.041
ID  - Liao2020
ER  -