Title: Dynamics of volatility spillovers with structural breaks in Indian foreign exchange market

Authors: Suresh Kashyap; Sachin Kashyap

Addresses: Mittal School of Business, Lovely Professional University, Phagwara, India ' Mittal School of Business, Lovely Professional University, Phagwara, India

Abstract: This research examines volatility spillovers with structural breaks in case of United States dollar (USD), Great Britain pound (GBP), Euro (EURO) and Japanese yen (JPY) of the Indian foreign exchange market from 3 January 1999 to 27 July 2018. First, the Bai and Perron test has been applied to know the structural break dates. We have found significant evidence of structural breaks in case of the respective currencies indicating one structural break in case of USD, two structural breaks in case of EURO, JPY and no structural break in case of GBP. Later on, the volatility has been checked applying the GARCH and EGARCH models on the total sample and the various sub-samples as defined by the structural breaks. In comparison to the full sample, the results of the model parameters estimates vary substantially across the various sub-samples.

Keywords: exchange rate; structural break; volatility; GARCH and EGARCH model; Bai and Perron test; ARCH-LM test.

DOI: 10.1504/IJBIR.2020.109032

International Journal of Business Innovation and Research, 2020 Vol.22 No.4, pp.488 - 505

Received: 25 Oct 2018
Accepted: 01 Feb 2019
Published online: 17 Aug 2020 *

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