Explain the shocks and fluctuations of the foreign exchange market and how to transfer these shocks to other markets

Subject Areas : Journal of Investment Knowledge

soqra razi kazemi ¹ ( Ph.D. Student, Department of Management, Rasht Branch, Islamic Azad University, Rasht, Iran )
Fraydoon Rahnamay Roodposhti ² ( Professor, Department of Accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran )
gholamreza zomorodian ³ ( Assistant Professor, Department of Accounting, Central Tehran Branch, Islamic Azad University, Tehran, Iran )
Ebrahim Chirani ⁴ ( Assistant Professor, Department of Management, Rasht Branch, Islamic Azad University, Rasht, Iran )

Received: 2021-04-08 Accepted : 2022-02-01 Published : 2023-06-22

Keywords: foreign exchange market, Market Fluctuations, financial markets, foreign exchange market shock,

Abstract :

The transmission of financial crises between different markets in an economy indicates the existence of channels of transmission of this crisis. Today, parallel currency markets are closely related to other markets such as gold, coins, stocks and oil. Channels that transmit shocks and fluctuations of the foreign exchange market to other markets can include information, macroeconomic variables, investment behaviors, and so on. In this study, using daily data from 2009 to 2017, the explanation of overflow fluctuations and shocks in the foreign exchange market and how to transfer these shocks to other markets has been examined. The results indicate the existence of fluctuations overflow as well as structural fractures due to the presence of this overflow. The research model and determination of interruptions is based on the VAR model. Yields and fluctuations as well as the presence of the Arch effect in the model are determined based on the VAR model. The MV-GARCH model is used to determine the returns in the foreign exchange market. Fluctuations and shocks of the foreign exchange market and its impact on other markets as well as future prices in different markets are determined based on the VAR model. The results of this study indicate the effect of shock in the foreign exchange market on the trend of future prices in this market as well as the impact on other markets.

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