The Impact of News Related Covid-19 on Exchange Rate Volatility:A New Evidence From Generalized Autoregressive Score Model

Deniz Erer ()
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Deniz Erer: İzmir, Türkiye.

EKOIST Journal of Econometrics and Statistics, 2023, vol. 0, issue 38, 105-126

Abstract: The COVID-19 pandemic causes serious problems for the economy. When considering the significant impact the COVID-19 pandemic had on capital flows and global trade, it can be stated that the outbreak of this virus has caused sharp fluctuations in exchange rate markets. From this point of view, this study examines the effect of the news regarding the COVID-19 pandemic on exchange rate volatility for 12 emerging and developed countries that were most affected by the outbreak. The data covers the period between January 1, 2019 and August 31, 2022. For this purpose, we use the Generalized Autoregressive Score (GAS) model with student-t distribution, which is a new approach to measure the volatility of a financial series and to obtain the volatility clustering and fat-tail properties of a financial series. The findings of thisstudy show that panic and fake news about the COVID-19 pandemic hasincreased the volatilites of exchange rates, while media hype news decreasesthe volatilities. These resultsindicate that the negative and speculative newsregarding COVID-19 adversely affects exchange rate volatility through increasing the uncertainty of financial markets.

Keywords: Exchange Rate Volatility; COVID-19; Generalized Autoregressive Score Model; Expected Shortfall; Tail Effect (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ist:ekoist:v:0:y:2023:i:38:p:105-126

DOI: 10.26650/ekoist.2023.38.1179575

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