Exchange rate Volatility and Interest rate Risk: In the case of Pakistan

Adnan Hussain, Muhammad Mubin and Irfan Lal ()

MPRA Paper from University Library of Munich, Germany

Abstract: The study examines the effects of volatility of exchange rate volatility on interest rates and inflation. For this purpose the study used monthly data over the period January 1990 to December 2010. To explore the volatility of exchange rate study used the ARCH (Auto Regressive Conditional Heterosidasticity) and GARCH (Generalized Auto regressive conditional Heterosidasticity). The result shows that positive association between exchange rate risk and interest rate in the form risk premia. The result of the study fulfills the interest parity condition and purchasing power parity.

Keywords: Exchange rate volatility; ARCH; GARCH (search for similar items in EconPapers)
JEL-codes: C1 F31 (search for similar items in EconPapers)
Date: 2011-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:106877

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