Energy Market Uncertainties and Exchange Rate Volatility: A GARCH-MIDAS Approach

Afees Salisu, Ahamuefula Ogbonna, Rangan Gupta and Qiang Ji ()
Additional contact information
Qiang Ji: Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China

No 202418, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we employ the generalized autoregressive conditional heteroscedasticity-mixed data sampling (GARCH-MIDAS) framework to forecast the daily volatility of 19 dollar-based exchange rate returns based on monthly metrics of oil price uncertainty (OPU), and relatively broader global and country-specific energy market-related uncertainty indexes (EUI) over the daily period of January, 1996 to September, 2022. We find that the global EUIs tend to perform better than the OPU, in terms of their respective GARCH-MIDAS-based forecast performances relative to the benchmark (GARCH-MIDAS-realized volatility (RV)) model, highlighting the need to look beyond the oil market to capture energy related uncertainties. This line of reasoning is further enhanced when we observe the relative (to the United States) country-specific EUIs to outperform the benchmark in a statistically significant manner for at least 14 currencies across the short-, medium-, and long-term forecasting horizons. Our findings have important implications for currency traders.

Keywords: Monthly Oil Price and Energy Market Uncertainties; Daily Exchange Rate Returns Volatility; GARCH-MIDAS; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 C53 F31 F37 Q02 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2024-04
New Economics Papers: this item is included in nep-ene, nep-opm and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Energy market uncertainties and exchange rate volatility: A GARCH-MIDAS approach (2024)
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:pre:wpaper:202418

Access Statistics for this paper

More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().