Climate Risks and Realized Volatility of Major Commodity Currency Exchange Rates

Matteo Bonato (), Oguzhan Cepni, Rangan Gupta and Christian Pierdzioch
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Matteo Bonato: Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa; IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France

No 202210, Working Papers from University of Pretoria, Department of Economics

Abstract: We find that climate-related risks forecast the intraday-data-based realized volatility of exchange-rate returns of eight major fossil fuel-exporters (Australia, Brazil, Canada, Malaysia, Mexico, Norway, Russia, and South Africa). We study a wide array of metrics capturing risks associated with climate change, derived from data directly on variables such as, for example, abnormal patterns of temperature. We control for various other moments (realized skewness, realized kurtosis, realized good and variance, upside and downside tail risk, and jumps) and estimate our forecasting models using random forests, a machine-learning technique tailored to analyze models with many predictors.

Keywords: Climate Risks; Commodity Currencies; Realized Variance; Forecasting (search for similar items in EconPapers)
JEL-codes: C22 C53 F31 Q54 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-02
New Economics Papers: this item is included in nep-big, nep-cis, nep-env, nep-his and nep-sea
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Journal Article: Climate risks and realized volatility of major commodity currency exchange rates (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202210

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