The Volatility of Romanian Exchange Rate: A GARCH Approach

Elena Pelinescu and Delia-Elena Diacona?u ()
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Delia-Elena Diacona?u: Faculty of Economics and Business Administration, ¡°Alexandru Ioan Cuza¡± University of Ia?i 22 Carol I Boulevard, Ia?i, 700505, ROMANIA
Authors registered in the RePEc Author Service: Delia Elena Diaconaşu

Review of Economics & Finance, 2015, vol. 5, 92-99

Abstract: The perspective of Romania adopting the Euro in year 2019 increases the interest of decision-makers and researchers regarding the volatility of the Romanian exchange rate. In this context, the aim of our paper is to analyze the means in which the economic crisis determines mutations in the features of the exchange rate variations in Romania during the period January 1st, 2007¨CMarch 16th, 2015. We employ non-parametric and parametric volatility measures, namely the rolling-sample volatility and the GARCH models in order to identify the national versus international macroeconomic determinants of exchange rate fluctuations. Our results generally support that, in both pre- and post-structural break periods, the main driver of the volatility of EUR/RON is the foreign exchange rate, followed by the international interest rate. However, there is a relevant difference between the two analyzed periods: the influence of the RON/ZLP exchange rate.

Keywords: Macroeconomic variables; Structural break; Rolling-sample volatility; GARCH models; Emerging market (search for similar items in EconPapers)
JEL-codes: E44 G01 G15 (search for similar items in EconPapers)
Date: 2015
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