scholarly journals Modeling Exchange Rate and Nigerian Deposit Money Market Dynamics Using Trivariate form of Multivariate GARCH Model

2019 ◽  
pp. 1-18
Author(s):  
Deebom, Zorle Dum ◽  
Tuaneh, Godwin Lebari
Keyword(s):  
Exchange Rate ◽  
Garch Model ◽  
Money Market ◽  
Multivariate Garch ◽  
Market Dynamics ◽  
Volatility Clustering ◽  
Volatility Spillovers ◽  
Multivariate Garch Model ◽  
The Difference ◽  
Student’S T

The risks associated with exchange rate and money market indicators have drawn the attentions of econometricians, researchers, statisticians, and even investors in deposit money banks in Nigeria. The study targeted at modeling exchange rate and Nigerian deposit banks money market dynamics using trivariate form of multivariate GARCH model. Data for the period spanning from 1991 to 2017 on exchange rate (Naira/Dollar) and money market indicators (Maximum and prime lending rate) were sourced for from the central bank of Nigeria (CBN) online statistical database. The study specifically investigated; the dynamics of the variance and covariance of volatility returns between exchange rate and money market indicators in Nigeria were examine whether there exist a linkage in terms of returns and volatility transmission between exchange rate and money market indicators in Nigeria and compared the difference in Multivariate BEKK GARCH considering restrictive indefinite under the assumption of normality and that of student’s –t error distribution.  Preliminary time series checks were done on the data and the results revealed the present of volatility clustering. Results reveal the estimate of the maximum lag for exchange rate and money market indicators were 4 respectively. Also, the results confirmed that there were two co-integrating equations in the relationship between the returns on exchange rate and money market indicators.  The results of the diagonal MGARCH –BEKK estimation  confirmed  that diagonal MGARCH –BEKK in students’-t was  the best fitted and an appropriate model for modeling exchange rate and Nigerian deposit money market dynamics using trivariate form of multivariate GARCH model. Also, the study confirmed presence of two directional volatility spillovers between the two sets of variables.

scholarly journals Money and Foreign Exchange Markets Dynamics in Nigeria: A Multivariate GARCH Approach

2021 ◽  
Vol 12 (No. 1) ◽  
pp. 109-138
Author(s):  
Ngozi V. Atoi ◽  
Chinedu G. Nwambeke
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Garch Model ◽  
Money Market ◽  
Multivariate Garch ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Dynamic Correlation

This study examines money market and foreign exchange market dynamics in Nigeria by estimating the dynamic correlation and volatility spillovers between Nigeria Naira/US Dollar Bureau De Change (BDC) exchange rate and interbank call rate with data from January 2007 to August 2019. The study employs a dynamic conditional correlation form of GARCH model (DCC-GARCH) to access the nature of correlation, while an unrestricted bivariate BEKK-GARCH (1, 1) form of multivariate GARCH model is utilized to investigate shocks and volatility spillover of the rates. The estimated DCC-GARCH (1, 1) reveals that interest rate and exchange rate are dynamically linked negatively, suggesting that exchange rate (or interest rate) is inversely sensitive to interest rate (or exchange rate) in Nigeria. This result was substantiated by the estimated BEKK-GARCH(1, 1) model. Furthermore, the effects of news (shocks spillover) are bi-directional across the markets. However, volatility spillover is unidirectional, from exchange rate to interest rate, suggesting that, calming the volatility in foreign exchange market does guarantee moderation of volatility in the money market, whereas the reverse is not the case. The results underscore the growing influence of foreign exchange market in the financial space of the Nigerian economy. Thus, the study recommends that foreign exchange policies aimed at maintaining exchange rate stability should be sustained, having found exchange rate to be more effective in moderating interest rate volatility in Nigeria.

A full-factor multivariate GARCH model

2003 ◽  
Vol 6 (2) ◽  
pp. 312-334 ◽  
Author(s):  
I. D. Vrontos ◽  
P. Dellaportas ◽  
D. N. Politis
Keyword(s):  
Garch Model ◽  
Multivariate Garch ◽  
Multivariate Garch Model

scholarly journals Detecting Shocks in The Economic Development Dynamics of Selected Countries

2014 ◽  
Vol 13 (2) ◽  
pp. 120-133
Author(s):  
Anna Janiga-Ćmiel
Keyword(s):  
Estimation Method ◽  
Garch Model ◽  
Positive Definite ◽  
Multivariate Garch ◽  
Contagion Effect ◽  
Multivariate Models ◽  
The United Kingdom ◽  
Multivariate Garch Model ◽  
Polish Economy ◽  
The Impact

Abstract The paper examines the development of the Polish economy as well as the economies of selected countries in the period from 2001 to 2012. For that purpose, models based on the GDP growth in particular countries were built. A comparative analysis of the development of economies in the countries concerned (the United Kingdom, Belgium, Denmark, France, Poland, the Netherlands), based on a specially built full-factor multivariate GARCH model, is presented. The theory of the construction of a full-factor multivariate GARCH model and its estimation method are discussed. In the paper, a multivariate GARCH model where the covariance matrix is always positive, definite and the number of parameters is relatively small compared to other multivariate models is proposed. The causality of the impact that economies exert on one another is examined and the occurrence of the contagion effect is verified by means of the Forbes and Rigobon test.

Sign in / Sign up

Export Citation Format

Share Document