Co-movements in volatility of dependency between US dollar and euro: analysing by conditional heteroscedasticity models

Lamia Jamel and Sihem Mansour

International Journal of Management and Enterprise Development, 2019, vol. 18, issue 1/2, 1-19

Abstract: In this study, we use for the first time the conditional heteroscedasticity specifications (GARCH, AGARCH, APARCH, Asymmetry MEM, MEM, EGARCH, GJR GARCH, and GAS-GARCH Student t models) to examine the volatility of exchange rate returns between the US dollar and the euro. So, the conditional heteroscedasticity models are used to capture the time-varying parameter by the function of the likelihood function. Methodologically, we utilise a daily data of the exchange rate between the US dollar and the euro during the period of study from 2 January 2000 to 30 June 2015. From the empirical findings, we remark that the exchange rate returns between the US dollar and the euro show a highly volatility and validate the presence of a greatly time-varying variance in the exchange rate time series obtained after the estimation of the conditional heteroscedasticity models. Besides, we can remark that the conditional heteroscedasticity volatility prediction attains their maximum after the financial crisis of 2008, especially on 2009. Our empirical findings indicate the existence of highly dependency between the US dollar and the euro which prove the economic and financial integration between the USA and the Euro zone.

Keywords: US dollar; euro; volatility; exchange rate; conditional heteroscedasticity models. (search for similar items in EconPapers)
Date: 2019
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