Inflation Uncertainty, Exchange Rate Depreciation and Volatility: Evidence from Ghana, Mozambique and Tanzania

Hassan Molana and Kwame Osei-Assibey

No 246, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee

Abstract: While flexible exchange rates facilitate stabilisation, exchange rate fluctuations can cause real volatility. This gives policy importance to the causal relationship between exchange rate depreciation and its volatility. An exchange rate may be expected to become more volatile when the underlying currency loses value. We conjecture that a reverse causation, which further weakens the currency, may be mitigated by price stability. Data from Ghana, Mozambique and Tanzania support this: depreciation makes exchange rate more volatile for all but volatility does not causes depreciation in Tanzania which has enjoyed a more stable inflation despite all countries adopting similar macro-policies since early 1990s.

Keywords: exchange rate; depreciation; volatility; causality; GARCH; VAR (search for similar items in EconPapers)
JEL-codes: E3 F3 F4 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2010-10
New Economics Papers: this item is included in nep-afr, nep-mac and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.dundee.ac.uk/media/dundeewebsite/econom ... cussion/DDPE_246.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_246.pdf [301 Moved Permanently]--> https://www.dundee.ac.uk/media/dundeewebsite/economicstudies/documents/discussion/DDPE_246.pdf)

Related works:
Working Paper: Inflation Uncertainty, Exchange Rate Depreciation and Volatility: Evidence from Ghana, Mozambique and Tanzania (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dun:dpaper:246

Access Statistics for this paper

More papers in Dundee Discussion Papers in Economics from Economic Studies, University of Dundee Contact information at EDIRC.
Bibliographic data for series maintained by Andrzej Kwiatkowski ().