How Does the Mauritanian Exchange Rate React During a Crisis? The Case of COVID-19

Mohamed Said Diah (), Mohamedou Cheikh Tourad, Youssef Lamrani Alaoui, Mohamedade Farouk Nanne and Mohamed Abdallahi Beddi
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Mohamed Said Diah: Scientific Computing, Computer Science and Data Science Research Unit (CSIDS), Faculty of Science and Technics, Nouakchott University, Nouakchott, Mauritania
Mohamedou Cheikh Tourad: Scientific Computing, Computer Science and Data Science Research Unit (CSIDS), Faculty of Science and Technics, Nouakchott University, Nouakchott, Mauritania
Youssef Lamrani Alaoui: Ifelab-LERMA, Mohammadia School of Engineering, Mohammed V University, Rabat B.P:8007.N.U, Morocco
Mohamedade Farouk Nanne: Scientific Computing, Computer Science and Data Science Research Unit (CSIDS), Faculty of Science and Technics, Nouakchott University, Nouakchott, Mauritania
Mohamed Abdallahi Beddi: Geometry, Analysis, Algebra, and Applications (G3A), Faculty of Science and Technics, Nouakchott University, Nouakchott, Mauritania

JRFM, 2025, vol. 18, issue 10, 1-32

Abstract: This paper examines the impact of the COVID-19 pandemic on the volatility of the EUR/MRU and USD/MRU exchange rates using GARCH-type models. Symmetric GARCH(1,1) and asymmetric specifications—EGARCH and GJR-GARCH—are applied to capture potential leverage effects over two periods: pre-COVID (January 2017–December 2019) and COVID (January 2017–December 2021). The results indicate that the pandemic increased short-run volatility for EUR/MRU, while its impact on USD/MRU was comparatively weaker. Asymmetric models reveal that COVID-19 altered the response of volatility to shocks, with EUR/MRU exhibiting heightened sensitivity and USD/MRU showing contrasting asymmetries. In addition, an out-of-sample backtesting exercise confirms the superior predictive performance of asymmetric models, particularly EGARCH for EUR/MRU and GJR-GARCH for USD/MRU. These findings underscore distinct volatility dynamics and the transmission of external shocks in a small open economy during periods of global uncertainty.

Keywords: exchange rate volatility; COVID-19 pandemic; GARCH(1,1) model; EGARCH; GJR-GARCH; speculative bubbles; leverage effect (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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