Modelling Exchange Rate Volatility in Zambia

Jonathan Chipili ()

The African Finance Journal, 2012, vol. 14, issue 2, 85-107

Abstract: The eight real kwacha bilateral exchange rates examined over the period 1968- 2008 in a GARCH framework are characterised by different conditional volatility dynamics. Evidence of asymmetric response to shocks suggests asymmetric central bank reaction to variations in volatility in exchange rates. An index of exchange rate volatility capturing influences specific to Zambia is constructed from the estimated conditional variance using principal components analysis for use as an alternative measure of exchange rate risk.

Keywords: Exchange Rate Volatility; GARCH; PCA (search for similar items in EconPapers)
JEL-codes: C22 F31 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journl:v:14:y:2012:i:2:p:85-107

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