Estimating Volatility Persistence in Exchange Rates under Structural Changes: The Case of US Dollars to NT Dollars

• Main Authors: Pin-Hua Chen, 陳品樺
• Other Authors: Dr. Chung-Chu Chuang
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/qyp4n3

碩士 === 淡江大學 === 管理科學學系企業經營碩士在職專班 === 102 === Since Taiwan is an island country, economy development is mainly driven by international trade. Under globalization and free capital movement cross countries, the exchange rate determined by international market affects significantly economy development, therefore, it is crucial to look closely into the volatility of exchange rate. ICSS algorithm is employed to detect the structural break points of volatility, C-GARCH(1,1) model is further adopted to discuss that the persistence of exchange rate volatility under structural change. This empirical results show that there are 8 times of structural change in terms of US dollars to NT dollars’ exchange rate from Jan. 1991 to Dec. 2013. Furthermore, under different sub periods, the results of C-GARCH(1,1) model shows significantly, the volatility having both ARCH and GARCH effects. By looking at coefficients in GARCH(1,1) model, we realize that persistence for exchange rate’s volatility does exist. If structural change is taken into account, when daily return of exchange rate is impacted by one unit of standardized of over future periods, the persistence of volatility comes back to original level. The conclusions can provide references to investors for decision-making.