Common Volatility Trends Across East African Foreign Exchange Markets

Pako Thupayagale and Thato Mokoti ()

The African Finance Journal, 2013, vol. 15, issue 1, 56-81

Abstract: This paper explores financial market convergence in East African economies by analysing the long-run volatility trends in the currencies of this region. In particular, a Component-GARCH model is estimated, which is able to distinguish short- and long-run volatility dynamics. Common movement of the long-run component is in turn used to infer if financial and economic convergence is occurring. The empirical results do not suggest the existence of a common volatility process in East African foreign exchange markets. Overall volatility trends of each currency appear to be largely country specific, suggesting that the introduction of a currency union may be premature.

Keywords: Exchange rate; volatility; GARCH; convergence; East Africa (search for similar items in EconPapers)
JEL-codes: F31 F36 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.journals.co.za/ej/ejour_finj.html (text/html)

Related works:
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:afj:journl:v:15:y:2013:i:1:p:56-81

Access Statistics for this article

More articles in The African Finance Journal from Africagrowth Institute Contact information at EDIRC.
Bibliographic data for series maintained by Kirk De Doncker ().