Does the Introduction of Futures on Emerging Market Currencies Destabilize the Underlying Currencies?
Electronic Access:
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Summary:
Recent interest in futures contracts on emerging market currencies has raised concerns among some central bank authorities about their ability to maintain stable currencies. This paper presents empirical results examining the influence of the Mexican peso, the Brazilian real, and the Hungarian forint futures contracts on the respective spot markets. While measures of linear dependence and feedback indicate strong connections between the respective markets, futures volatility does not significantly explain spot market volatility, nor does it increase after futures introductions. To account for the characteristics of the spot and futures returns a SWARCH model has been employed to estimate volatility.
Series:
Working Paper No. 1998/013
Subject:
Currencies Currency markets Emerging and frontier financial markets Financial institutions Financial markets Futures Futures markets Money
Notes:
Also published in Staff Papers, Vol. 45, No. 3, September 1998.
English
Publication Date:
February 1, 1998
ISBN/ISSN:
9781451842975/1018-5941
Stock No:
WPIEA0131998
Pages:
39
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