An ARCH/GARCH Approach on Euro/RON Exchange Rate Volatility

Luciana Simion () and Antonia Mihai ()
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Luciana Simion: The Bucharest University of Economic Studies
Antonia Mihai: The Bucharest University of Economic Studies

Ovidius University Annals, Economic Sciences Series, 2021, vol. XXI, issue 2, 1145-1152

Abstract: Our study investigates the influence of political events, such as elections, censure motions, and economic policies, on the financial markets. We analyzed using ARCH/ GARCH models daily EURORon exchange rates from January 2017 to December 2020 to highlight the interconnection between political and economic shocks and the volatility of the financial markets. The results indicate a strong correlation between turbulence caused by political events and decisions and the volatility of the exchange rates in the studied period. It is necessary to understand better this link between the political factor and the effects that economic measures have on financial markets, especially in the current economic context, health, and, financial crisis generated by the COVID-19 pandemic, which caused governments to respond in unprecedented ways and lead to exceptional measures.

Keywords: politics; exchange rate; volatility; Garch (search for similar items in EconPapers)
JEL-codes: C10 G14 G18 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xxi:y:2021:i:2:p:1145-1152

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