Geopolitical risks and historical exchange rate volatility of the BRICS
Juncal Cuñado and
International Review of Economics & Finance, 2022, vol. 77, issue C, 179-190
The predictability of geopolitical risks (GPR) for exchange rate volatility of the BRICS is examined using both historical and recent GPR data. Relying on the GARCH-MIDAS-X model based on available data frequencies, we find that the BRICS exchange rates are more vulnerable to recent GPR data than the historical data. Additional analysis suggests contrasting evidence between the recent global GPR data and the country-specific GPR data implying that the BRICS exchange rates are more vulnerable to global than domestic GPR. Finally, we document some out-of-sample economic gains of accounting for GPR in the valuation of foreign exchange portfolio.
Keywords: Geopolitical risk; Exchange rate volatility; BRICS; GARCH-MIDAS-X; Forecast evaluation (search for similar items in EconPapers)
JEL-codes: C53 F31 G17 (search for similar items in EconPapers)
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Working Paper: Geopolitical Risks and Historical Exchange Rate Volatility of the BRICS (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:77:y:2022:i:c:p:179-190
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