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Modeling the Volatility of Exchange Rates: GARCH Models

Fahima Charef ()

Academic Journal of Economic Studies, 2017, vol. 3, issue 1, 39-47

Abstract: The modeling of the dynamics of the exchange rate at a long time remains a financial and economic research center. In our research we tried to study the relationship between the evolution of exchange rates and macroeconomic fundamentals. Our empirical study is based on a series of exchange rates for the Tunisian dinar against three currencies of major trading partners (dollar, euro, yen) and fundamentals (the terms of trade, the inflation rate, the interest rate differential), of monthly data, from jan 2000 to dec-2014, for the case of the Tunisia. We have adopted models of conditional heteroscedasticity (ARCH, GARCH, EGARCH, TGARCH). The results indicate that there is a partial relationship between the evolution of the Tunisian dinar exchange rates and macroeconomic variables.

Keywords: Exchange rate; fundamental macroeconomic variables; conditional heteroskedasticity models (search for similar items in EconPapers)
JEL-codes: O24 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:khe:scajes:v:3:y:2017:i:1:p:39-47