Modelling South African currency crises as structural changes in the volatility of the rand

South African Journal of Economics

Volumn 77, Issue 3, 2009, Pages 363-379

  Duncan, Andrew Stuart ^a   Liu, Guangling Dave ^b  

^a UNIVERSITY OF JOHANNESBURG   (South Africa)

^b STELLENBOSCH UNIVERSITY   (South Africa)

Author keywords

Currency crisis; Exchange rate; GARCH; ICSS algorithm; Volatility

Indexed keywords

ALGORITHM; CURRENCY MARKET; EXCHANGE RATE; FINANCIAL CRISIS; MODELING; PRECISION; STRUCTURAL CHANGE; THEORETICAL STUDY; UNCERTAINTY ANALYSIS;

AFRICA; SOUTH AFRICA; SOUTHERN AFRICA; SUB-SAHARAN AFRICA;

EID: 70149100655     PISSN: 00382280     EISSN: 18136982     Source Type: Journal    
DOI: 10.1111/j.1813-6982.2009.01215.x     Document Type: Article

References (31)

1. ABIAD, A. (2003). Early-Warning Systems: A Survey and a Regime-Switching Approach. IMF Working Paper 03/32.
2. AGGARWAL, R., INCLAN, C. and LEAL, R. (1999). Volatility in emerging stock markets. Journal of Financial and Quantitative Analysis, 34(1): 33-55.
3. BANK FOR INTERNATIONAL SETTLEMENTS. (2007). Foreign exchange and derivatives market activity in 2007. Triennial Central Bank Survey, December 2007. Available at: http://www.bis.org/publ/ rpfxf07t.pdf?noframes=1 [Accessed 22 June 2009].
4. BERA, A. K. and HIGGINS, M. L. (1993). ARCH models: Properties, estimation and testing. Journal of Economic Surveys, 7(4): 305-365.
5. BHUNDIA, A. J. and RICCI, L. A. (2005). The rand crises of 1998 and 2001: What have we learned? In M. Nowak and L. A. Ricci (eds), Post-Apartheid South Africa: The First Ten Years. Washington, DC: IMF, 156-173.
6. BOLLERSLEV, T. (1986). Generalized autoregressive conditional heteroskedasticity. Journal of Econometrics, 31: 307-328.
7. BOLLERSLEV, T. and WOOLDRIDGE, J. M. (1992). Quasi-maximum likelihood estimation and inference in dynamic models with time varying covariances. Econometric Reviews, 11: 143-172.
8. DIEBOLD, F. X. and LOPEZ, J. A. (1995). Modelling volatility dynamics. In K. D. Hoover (ed.), Macroeconomics: Developments, Tensions and Prospects. Boston, Dordrecht, and London: Kluwer Academic, 427-466.
9. DIEBOLD, F. X. and PAULY, P. (1987). Structural-change and the combination of forecasts. Journal of Forecasting, 6(1): 21-40.
10. DIEBOLD, F. X., WEINBACH, G. C. and LEE, J. H. (1994). Regime switching with time-varying transition probabilities. In C. P. Hargreaves (ed.), Nonstationary Time Series Analysis and Cointegration. Oxford: Oxford University Press, 283-302.
11. ENGLE, R. (2001). GARCH 101: The use of ARCH/GARCH models in applied econometrics. Journal of Economic Perspectives, 15(4): 157-168.
12. FARREL, G. N. (2001). Capital Controls and the Volatility of South African Exchange Rates. SARB Occasional Paper No. 15.
13. FRANKEL, J. A. and ROSE, A. K. (1994). A Survey of Empirical Research on Nominal Exchange Rates. NBER Working Paper No. 4865.
14. HALLWOOD, C. P. and MACDONALD, R. (2000). International Money and Finance, 3rd edn. Maldon, Oxford, Victoria and Berlin: Blackwell Publishing.
15. HAMILTON, J. D. (1989). A new approach to the economic analysis of nonstationary time series and the business cycle. Econometrica, 57: 357-384.
16. HAMILTON, J. D. (1990). Analysis of time series subject to changes in regime. Journal of Econometrics, 45: 39-70.
17. INCLAN, C. and TIAO, G. C. (1994). Use of cumulative sum of squares for retrospective detection of change of variance. Journal of the American Statistical Association, 89(427): 913-923.
18. KEARNS, P. and PAGAN, A. R. (1993). Australian stock market volatility, 1875-1987. The Economic Record, 69: 163-178.
19. KNEDLIK, T. (2006). Signalling Currency Crises in South Africa. IWH Discussion Papers No. 19.
20. KNEDLIK, T. and SCHEUFELE, R. (2008). Forecasting currency crises: Which methods signalled the South African crisis of June 1996? South African Journal of Economics, 76(3): 367-383.
21. KURZ, M. (1994). On rational belief equilibria. Economic Theory, 4: 859-876.
22. PEROLD, A. F. (2004), The capital asset pricing model. Journal of Economic Perspectives, 18(3): 3-24.
23. LAMOUREUX, C. G. and LASTRAPES, W. D. (1990). Persistence in variance, structural change and the GARCH model. Journal of Business and Economic Statistics, 8(2): 225-234.
24. LASTRAPES, W. D. (1989). Exchange rate volatility and U.S. monetary policy: An ARCH application. Journal of Money, Credit and Banking, 21: 66-77.
25. LEE, J. H. (1991). Non-stationary Markov-switching Models of Exchange Rates: The Pound-Dollar Exchange Rate. PhD Dissertation, University of Pennsylvania.
26. MALIK, F. (2003). Sudden changes in variance and volatility persistence in foreign exchange markets. Journal of Multinational Financial Management, 13: 217-230.
27. MALIK, F., EWING, B. T. and PAYNE, J. E. (2005). Measuring volatility persistence in the presence of sudden changes in the variance of Canadian stock returns. Canadian Journal of Economics, 38(3): 1037-1056.
28. MYBURGH COMMISSION. (2002). Final Report of the Commission of Inquiry into the Rapid Depreciation of the Rand and Related Matters -Executive Summary. Available at: http://www.polity.org.za/polity/govdocs/ commissions/2002/rand/exec_summary.pdf [Accessed 5 August 2009].
29. OBSTFELD, M. (1986). Rational and self-fulfilling balance-of-payments crises. American Economic Review, 76(1): 72-81.
30. POON, S. and GRANGER, C. W. J. (2003). Forecasting volatility in financial markets: A review. Journal of Economic Literature, 41(2): 478-539.
31. WILSON, B., AGGARWAL, R. and INCLAN, C. (1996). Detecting volatility changes across the oil sector. Journal of Futures Markets, 16: 313-330.