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MODELLING ASYMMETRIC EXCHANGE RATE DEPENDENCE *

MODELLING ASYMMETRIC EXCHANGE RATE DEPENDENCE * We test for asymmetry in a model of the dependence between the Deutsche mark and the yen, in the sense that a different degree of correlation is exhibited during joint appreciations against the U.S. dollar versus during joint depreciations. We consider an extension of the theory of copulas to allow for conditioning variables, and employ it to construct flexible models of the conditional dependence structure of these exchange rates. We find evidence that the mark–dollar and yen–dollar exchange rates are more correlated when they are depreciating against the dollar than when they are appreciating. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Economic Review Wiley

MODELLING ASYMMETRIC EXCHANGE RATE DEPENDENCE *

International Economic Review , Volume 47 (2) – May 1, 2006

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References (161)

Publisher
Wiley
Copyright
Copyright © 2006 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0020-6598
eISSN
1468-2354
DOI
10.1111/j.1468-2354.2006.00387.x
Publisher site
See Article on Publisher Site

Abstract

We test for asymmetry in a model of the dependence between the Deutsche mark and the yen, in the sense that a different degree of correlation is exhibited during joint appreciations against the U.S. dollar versus during joint depreciations. We consider an extension of the theory of copulas to allow for conditioning variables, and employ it to construct flexible models of the conditional dependence structure of these exchange rates. We find evidence that the mark–dollar and yen–dollar exchange rates are more correlated when they are depreciating against the dollar than when they are appreciating.

Journal

International Economic ReviewWiley

Published: May 1, 2006

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