Asymmetric connectedness across Asia-Pacific currencies: Evidence from time-frequency domain analysis

ABSTRACT

We estimate the asymmetric time- and frequency connectedness across 11 Asia-Pacific exchange rates using daily data from Jan 1995 to Mar 2021. Our results reveal that in terms of static spillover, Asia-Pacific currencies are mainly disconnected except Australian Dollar and Singapore Dollar during normal times. The currencies form contagions during crisis periods. The currencies form positive and negative clusters during both short and long run. In terms of time-domain spillover, the pattern of daily return connectedness shows that the currencies of developed (emerging) economies are net transmitters (receivers) of shocks. We observe positive short run contagions (devaluation) of sampled currencies during Asian Financial Crisis and COVID19 pandemic. There are negative (appreciation) long run spillovers during Argentinean debt crisis and Chinese financial market crisis and positive long run contagions during Global Financial Crisis. The study carries important implications for policy makers and investors.