A STUDY OF SPECULATIVE BUBBLES IN FOREIGN EXCHANGE MARKET-AN APPLICATION OF REGIME SWITCHING MODEL

• Main Authors: Zhi-pei Chang, 張資北
• Other Authors: Sheue-fuh Liang
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/26743431281456871473

碩士 === 南華大學 === 財務金融學系財務管理碩士班 === 96 === 　　This research primarily applied Markov Switching model to investigate the speculative bubbles in exchange markets, using exchange rate data from Taiwan, Japan and U.K. In general, the Markov Switching model can file remedy the void of the past studies which could only reveal the existent and inexistent phenomenon of bubbles in exchange rate market. This study is generally based on van Norden’s (1996) assumptions that the probability and size of the collapses. It is shown that such behavior should lead to a particular kind of regime-switching behavior in exchange rate innovations. Instead of measuring fundamentals of exchange rate, this research constructed the real exchange rate using real interest rate differential model as a measurement of relative bubble size. Thus, observe how the rational bubbles explaining the movements in exchange rate market. The empirical result from the two states MSM parameters are statistically significant in the Japanese yen and the British pound. From the probability of two states, which are executed through the smoothing and filtering estimation, we find that traders in markets expect that bubble will collapse with higher probability. However, we can not find significant evidence to support that there exist bubbles in Taiwan exchange rates.