Information content of exchange rate volatility: Turkish experience

Levent Korap ()

MPRA Paper from University Library of Munich, Germany

Abstract: This study constructs an empirical model of the volatility of the TL/US$ exchange rate for the Turkish economy during the post-2001 crisis period ending on August 2006. Employing the Exponential GARCH (EGARCH) estimation methodology of econometrics, we find that the volatility of a given shock to the exchange rate is highly persistent and the successive forecasts of the conditional variance converge to the steady state quite slowly. In addition, the conditional variance of the exchange rate reacts differently to a given negative shock than to a positive shock with equal magnitude. The plot of the News Impact Curve indicates that a foreign investor would face a higher uncertainty when there is an unanticipated increase in the exchange rate when compared to an unanticipated decrease.

Keywords: Exchange Rate Volatility; News Impact; Turkish Economy (search for similar items in EconPapers)
JEL-codes: C22 C87 F31 (search for similar items in EconPapers)
Date: 2007-04
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Citations: View citations in EconPapers (2)

Published in International Business and Economics Research Journal 2.6(2007): pp. 9-14

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19598

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