scholarly journals Persistence And Asymmetry In Exchange Rate Volatility

2012 ◽  
Vol 11 (9) ◽  
pp. 971
Author(s):  
S. Aun Hassan
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
The United States ◽  
Good News ◽  
Economic Downturn ◽  
Exogenous Shocks ◽  
The Past

Recent economic downturn in the United States and Europe has affected major currencies around the world. This paper focuses on the behavior of exchange rates over the past decade to study how volatility pattern of these exchange rates responds to any exogenous shocks. The paper focuses on persistence and asymmetry in volatility of major exchange rates due to exogenous shocks. The paper employs a univariate GARCH and an EGRACH model to test the persistence and asymmetry of exchange rate volatility using data from the past decade plus. The results show high persistence and asymmetric behavior in volatility implying that the effect of good news on exchange rates is different from the effect of bad news. The results of this paper have important implications for foreign exchange investors and will provide a better understanding of the foreign exchange market to interested observers.

Monetary and Exchange Rate Policies for International Financial Stability: A Proposal

1988 ◽  
Vol 2 (1) ◽  
pp. 83-103 ◽  
Author(s):  
Ronald I McKinnon
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Purchasing Power Parity ◽  
Financial Stability ◽  
Foreign Exchange Market ◽  
The United States ◽  
Power Parity ◽  
Monetary Reform ◽  
Exchange Rate Fluctuations

What keeps the three major industrial blocs -- Western Europe, North America, and industrialized Asia -- from developing a common monetary standard to prevent exchange-rate fluctuations? One important reason is the differing theoretical perspectives of economic advisers. The first issue is whether or not a floating foreign exchange market -- where governments do not systematically target exchange rates -- is “efficient.” Many economists believe that exchange risk can be effectively hedged in forward markets so international monetary reform is unnecessary. Second, after a decade and a half of unremitting turbulence in the foreign exchange markets, economists cannot agree on “equilibrium” or desirable official targets for exchange rates if they were to be stabilized. The contending principles of purchasing power parity and of balanced trade yield very different estimates for the “correct” yen/dollar and mark/dollar exchange rates. Third, if the three major blocs can agree to fix nominal exchange rates within narrow bands, by what working rule should the new monetary standard be anchored to prevent worldwide inflation or deflation? After considering the magnitude of exchange-rate fluctuations since floating began in the early 1970s, I analyze these conceptual issues in the course of demonstrating how the central banks of Japan, the United States, and Germany (representing the continental European bloc) can establish fixed exchange rates and international monetary stability.

scholarly journals The “day-of-the-week” effects in the exchange rate of Latin American currencies

2019 ◽  
Vol 14 (PNEA) ◽  
pp. 485-507
Author(s):  
Roberto Joaquín Santillán Salgado ◽  
Alejandro Fonseca Ramírez ◽  
Luis Nelson Romero
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Latin American ◽  
Foreign Exchange Market ◽  
The United States ◽  
Management Decision ◽  
Exchange Market ◽  
Day Of The Week ◽  
The Exchange Rate

This paper examines the “day-of-the-week” anomaly in the foreign exchange market of six major Latin American countries’ currencies: (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), all with respect to the United States’ dollar. The returns of daily exchange rates are stationary, so we use linear regressions combined with GARCH, TARCH and EGARCH models to explore the presence of the “day-of-the-week” anomaly. The results confirm the presence of “abnormal” effects in some of the currencies and in some days of the week, particularly on Fridays and Mondays. Moreover, volatility in exchange rates shows clustering behavior, as well as leverage effects, which are carefully modelled in our analysis. This paper contributes to the literature by studying the “day-of-the-week” effects in currency exchange rate markets, a clear innovation with respect to the typical stock market analysis. The results reported are useful for foreign exchange market traders, currency exposure management decision makers, monetary authorities, and financial policy designers in the countries included in the study. Indeed, the results suggest the presence of a typical behavior of the exchange rate of all the currencies included in the sample.

scholarly journals The foreign exchange market in Barcelona at the beginning of the fifteenth century

2021 ◽  
pp. 1-28
Author(s):  
Angela Orlandi ◽  
Giacomo Toscano
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Fifteenth Century ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Exchange Market ◽  
Macroeconomic Factors ◽  
Local Currency ◽  
European Markets

Based on the reconstruction of the monetary flows of a merchant-banking company operating in Barcelona at the beginning of the fifteenth century, this study aims to understand the reasons behind exchange-rate variations in the local currency with respect to the principal European markets, as well as the modalities and predictability of such oscillations. By using real rather than ‘hearsay’ rates, we present new assessments of the seasonal character of exchange rates and their sensitivity to conditions of currency abundance or shortage. In addition, econometric analysis shows that exchange-rate volatility was quite modest and dependent on geographic and macroeconomic factors, such as the system of commercial flows.

Asymmetric effect of exchange rate volatility on trade in sub-Saharan African countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
James Temitope Dada
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Asymmetric Structure ◽  
Asymmetric Effect ◽  
Exchange Market ◽  
African Countries ◽  
Content Type ◽  
Sub Saharan

PurposeThe purpose of this study is to examine the effect of asymmetric structure inherent in exchange rate volatility on trade in sub-Saharan African countries from 2005 to 2017.Design/methodology/approach17 countries in sub-Saharan African Countries are used for the study. Exchange rate volatility is generated using generalised autoregressive conditional heteroscedacity (1,1), while the asymmetric components of exchange rate volatility are generated using a refined approach of cumulative partial sum developed by Granger and Yoon (2002). Two-step generalised method of moments is used as the estimation technique in order to address the problem of endogeneity, commonly found in panel data.FindingsThe result from the study shows the evidence of exchange rate volatility clustering which is strictly persistent in sub-Saharan African countries. The asymmetric components (positive and negative shocks) of exchange rate volatility have negative and significant effect on trade in the region. Meanwhile, the effect of negative exchange rate volatility is higher on trade when compared with the positive exchange rate volatility. Furthermore, real exchange rate has negative and significant effect on trade in sub-Saharan African countries.Research limitations/implicationsThe outcomes of this study are important for participants in foreign exchange market. As investors in foreign exchange market react more to the negative news than positive news, investors need to diversify their risk. Also, regulators in the market need to formulate appropriate macroeconomic policies that will stabilize exchange rate in the region.Originality/valueThis study deviates from extant studies in the literature by incorporating asymmetric structure into the exchange rate trade nexus using a refined approach.

Volatility transmission in African foreign exchange markets

2016 ◽  
Vol 7 (2) ◽  
pp. 205-224 ◽  
Author(s):  
Emmanuel Carsamer
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Financial Market ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Exchange Rate Policy ◽  
Future Research ◽  
Research Approach ◽  
Content Type ◽  
Volatility Transmission

Purpose – The concept of volatility transmission and co-movement has witnessed a resurgence in the international finance literature in recent years after the black swan events which gave evidence of financial market linkages. The purpose of this paper is to examine the dynamic sources of volatility transmission in the foreign exchange market in recent financial market integration in Africa. Design/methodology/approach – A conceptual framework was adapted from the extant literature and was used as the basis of modeling exchange rate volatility transmission. This paper adopts a quantitative research approach and opts for augmented DCC model to empirically unearth the sources of exchange rate volatility transmission. Findings – The key findings of the study are that, the African market is more prone to shock from outside than in the region. Macroeconomic news surprises influence volatility transmission and co-movements. Robust support is found for trade balance, interest rate and gross domestic product. These findings clearly demonstrate the low level of financial development and challenges that sometimes exist in exchange rate-policy implementation by policy makers. Research limitations/implications – Interested academics and practitioners working in the area might incorporate bilateral investment into the model of exchange rate correlation in future research. Originality/value – Unilaterally considering exchange rate volatility transmission and subsequent augmentation of the DCC model, this study makes a modest contribution to the examination of exchange rate correlations in Africa. This study makes an important contribution in not only addressing this imbalance, but more importantly improving the relative literature on exchange rate volatility transmission.

The Stochastic Character of Japanese Exchange Rates

2004 ◽  
Vol 5 (1) ◽  
pp. 77-90
Author(s):  
Nikiforos Laopodis
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Exchange Rate Volatility ◽  
Transmission Mechanism ◽  
Good News ◽  
Volatility Transmission ◽  
Volatility Spillovers ◽  
The Us ◽  
Us Dollar ◽  
Multivariate Exponential

The paper explores the stochastic character of six yen exchange rates with respect to the Canadian dollar, French franc, Italian lira, German mark, British pound and the US dollar for the 1973-2002 periods. The methodological design is the multivariate Exponential GARCH model, which is capable of capturing asymmetries in the exchange rate volatility transmission mechanism. The results point to significant reciprocal and positive volatility spillovers after the Plaza Accord of 1985. Furthermore, the finding of absence of asymmetry in the same period implies that bad and/or good news in a particular market positively and equally affects volatility in the next market.

Behaviour of the Foreign Exchange Rates of BRICS: Is it Chaotic?

2018 ◽  
Vol 11 (2) ◽  
pp. 1-19 ◽  
Author(s):  
Sharad Nath Bhattacharya ◽  
Mousumi Bhattacharya ◽  
Basav Roychoudhury
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Deterministic Chaos ◽  
Nonlinear Dependence ◽  
Foreign Exchange Rates ◽  
Brics Countries ◽  
Long Run ◽  
Chaotic Nature

The article focuses on the behaviour of foreign exchange rates of BRICS countries in reference to US dollar with special emphasis on examining presence of nonlinear dependence and deterministic chaos. The findings did not indicate random walk behaviour in the returns for all exchange rates and performance of GARCH as well as EGARCH models are reasonably good in capturing the conditional volatility. Further evidences suggest existence of nonlinear dependence and we compute Maximal Lyapunov Exponent and Correlation Dimension test with multiple surrogate series which confirms the chaotic nature of the exchange rates for all countries under study except for South Africa. The findings support short run predictability in exchange rates while long run predictions are unlikely to be successful. The chaotic nature of the foreign exchange market calls for newer intervention mechanism by the Central Bank of the respective countries to limit the exchange rate volatility.

scholarly journals Impact of Exchange Rate Management on the Nigerian Economic Growth: Empirical Validation

2019 ◽  
pp. 28-35
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Monetary Economics ◽  
Exchange Market ◽  
Central Bank Intervention ◽  
Foreign Exchange Intervention ◽  
International Money

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