Bewertung des Arabian Journal of Business and Management

Integration and Volatilitys Persistence in Emerging and Developed countries: Impulse Responses and Multivariate DCC GARCH

Abstract

The financial sectors have significant direct and indirect effects on the real economy because they are responsible for saving mobilization and credit allocation. So as to maximize their utility and well manage potential risks, stockholders and investors can use various financial products. If the financial sector is healthy, credit should become more available and the cost of finance should be more affordable. Up to this point, little is known about how stock markets, exchange rates and crude oil respond to financial stress shock. This paper uses monthly stock indexes, exchange rates and crude oil prices data from April 2003 until December 2014 to test and model the international markets’ integration, short term shock and volatility persistence in both emerging and developed countries. Trivariate DCC GARCH model and impulse responses show several interdependences and integration between international stock markets, exchange rates and crude oil.