Edith Cowan University
Faculty of Business and Law
School of Accounting, Finance and Economics
This study is motivated by the stylized fact that the asymmetry in dependence usually exists in returns of financial data series. Owing to political and monetary reasons, this phenomenon may be present in daily changes of exchange rates. In this paper, we study the relationships between five currencies in Asia around the period of Asian Financial Crisis in 1997, including the Singapore Dollar, Japanese Yen, South Korea Won, Thailand Baht and Indonesia Rupiah. We employ various time-varying copula models to examine the possible structural breaks. The results indicate significant changes at the dependence level, tail behavior and asymmetry structures between returns of all permuted pairs from the five currencies before and after the crisis. Other methods for identifying structure changes are also explored to compare and contrast the findings using the copular models. The results show that the copular approach seems to have more explanatory power than the existing ones in identifying structure breaks.