GARCH Effect and Asymmetric Impact of Information on Exchange Rate Volatility

S S Deb

The IUP Journal of Bank Management, 2004, vol. III, issue 4, 50-58

Abstract: The study estimates the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model for a set of exchange rate series of three major currencies against the Indian Rupee. The study finds the evidence of the dimensionally weak and statistically insignificant Autoregressive Conditional Heteroskedasticity (ARCH) effects, as compared to GARCH effects, on the UK Pound and Japanese Yen. There is also an evidence of volatility persistence in the case of US Dollar. Besides the GARCH effects, the asymmetric impact of information on exchange rate volatility is also tested using GJR-GARCH and EGARCH models. The empirical evidence shows that the exchange rate market responds asymmetrically to favorable and unfavorable information.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjbm:v:03:y:2004:i:4:p:50-58

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