Global Uncertainty and Exchange Rate Volatility

Oğuz Tümtürk ()
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Oğuz Tümtürk: , Ordu University Faculty of Economics and Administrative Sciences, Department of Economics, Ordu, Turkiye

EKOIST Journal of Econometrics and Statistics, 2022, vol. 0, issue 37, 69-84

Abstract: This paper investigates the impact of global uncertainty on Turkey's exchange rate volatility via quantile regression approach. Using quantile regression approach, estimated uncertainty coefficients are allowed to differ over quantiles of the exchange rate volatility. The EGARCH model is the best fit for measuring exchange rate volatility due to the fact that exchange rate series exhibit “asymmetric volatility”. In this study we employed global economic policy uncertainty index GEPU constructed by Baker et al. (2013) as a proxy of global uncertainty. Empirical results suggest that higher volatility of exchange rate is associated with a greater positive shock of GEPU. However, estimated parameters are statistically significant at lower exchange rate volatility since the CBRT intervenes the foreign exchange markets and restricts the excessive fluctuations in exchange rates to achieve financial stability.

Keywords: Economic Policy Uncertainty; Exchange Rate Volatility; Quantile Regression (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ist:ekoist:v:0:y:2022:i:37:p:69-84

DOI: 10.26650/ekoist.2022.37.1112795

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