Empirical Analysis on the USD/all Exchange Rate Volatility in Albanian Market: Preliminary Results

Ardita Todri and Giuseppe Di Liddo

European Journal of Economics and Business Studies Articles, 2015, vol. 1

Abstract: This paper aims to forecast the USD/ALL exchange rate volatility in short term period in Albanian market, being that the American dollar is considered a safe currency independently to the political context in the rest of the world. Furthermore, USD is the second foreign currency after Euro (according to financial and commercial transactions) and it is characterized by a peculiar probabilistic volatility distribution. In particular, USD volatility represents a continuous concern for economic agents exposed to the exchange risk. It follows that the measurement of the USD/ALL exchange rate volatility may help in the assessment and maintenance of capital needed for coverage purposes. The common financial time series dynamic models such as ARMA (1;1), ARCH (1) and GARCH (1;1) can be used to estimate the USD/ALL exchange rate volatility in short term period. Our results suggest that, in the presence of political factors as well as external shocks derived from country’s main trade partners, the best way to estimate and forecast the USD/ALL exchange rate volatility in the short term is the use of the MS-GARCH model.

Keywords: financial time series dynamic models; exchange rate volatility forecasting. (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eur:ejesjr:31

DOI: 10.26417/ejes.v2i1.p180-195

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