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Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis
Research on the exchange rate volatility and dynamic conditional correlation of African currencies/financial markets interdependence appears to be limited. In this paper, we employ GARCH models to characterize the exchange rate volatility of eight major African currencies. The variation of interdepe...
Autores principales: | , , , |
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Formato: | Online Artículo Texto |
Lenguaje: | English |
Publicado: |
Springer US
2022
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Materias: | |
Acceso en línea: | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9630077/ https://www.ncbi.nlm.nih.gov/pubmed/36345292 http://dx.doi.org/10.1007/s10614-022-10340-9 |
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author | Afuecheta, Emmanuel Okorie, Idika E. Nadarajah, Saralees Nzeribe, Geraldine E. |
author_facet | Afuecheta, Emmanuel Okorie, Idika E. Nadarajah, Saralees Nzeribe, Geraldine E. |
author_sort | Afuecheta, Emmanuel |
collection | PubMed |
description | Research on the exchange rate volatility and dynamic conditional correlation of African currencies/financial markets interdependence appears to be limited. In this paper, we employ GARCH models to characterize the exchange rate volatility of eight major African currencies. The variation of interdependence with respect to time is described using the DCC-GARCH model. From the results of the DCC, remarkable variations in correlations through time across these countries are observed with the correlations varying from low to moderate, suggesting that African economies are generally governed by certain economic factors and are vastly regulated. These regulations, including exchange rate misalignment led to sluggish and negative growth in most of the African countries. For instance, persistent misalignment can cause high levels of inflation, for example, undervaluation. Overvaluation can lead to trade imbalances and they can in turn create macroeconomic instability and balance of payment problems. Given these results, we suggest that policy makers should revamp and adopt state resilience so as to reduce the negative effect of exchange rate misalignment on economic growth. |
format | Online Article Text |
id | pubmed-9630077 |
institution | National Center for Biotechnology Information |
language | English |
publishDate | 2022 |
publisher | Springer US |
record_format | MEDLINE/PubMed |
spelling | pubmed-96300772022-11-03 Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis Afuecheta, Emmanuel Okorie, Idika E. Nadarajah, Saralees Nzeribe, Geraldine E. Comput Econ Article Research on the exchange rate volatility and dynamic conditional correlation of African currencies/financial markets interdependence appears to be limited. In this paper, we employ GARCH models to characterize the exchange rate volatility of eight major African currencies. The variation of interdependence with respect to time is described using the DCC-GARCH model. From the results of the DCC, remarkable variations in correlations through time across these countries are observed with the correlations varying from low to moderate, suggesting that African economies are generally governed by certain economic factors and are vastly regulated. These regulations, including exchange rate misalignment led to sluggish and negative growth in most of the African countries. For instance, persistent misalignment can cause high levels of inflation, for example, undervaluation. Overvaluation can lead to trade imbalances and they can in turn create macroeconomic instability and balance of payment problems. Given these results, we suggest that policy makers should revamp and adopt state resilience so as to reduce the negative effect of exchange rate misalignment on economic growth. Springer US 2022-11-03 /pmc/articles/PMC9630077/ /pubmed/36345292 http://dx.doi.org/10.1007/s10614-022-10340-9 Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022, Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic. |
spellingShingle | Article Afuecheta, Emmanuel Okorie, Idika E. Nadarajah, Saralees Nzeribe, Geraldine E. Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title | Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title_full | Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title_fullStr | Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title_full_unstemmed | Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title_short | Forecasting Value at Risk and Expected Shortfall of Foreign Exchange Rate Volatility of Major African Currencies via GARCH and Dynamic Conditional Correlation Analysis |
title_sort | forecasting value at risk and expected shortfall of foreign exchange rate volatility of major african currencies via garch and dynamic conditional correlation analysis |
topic | Article |
url | https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9630077/ https://www.ncbi.nlm.nih.gov/pubmed/36345292 http://dx.doi.org/10.1007/s10614-022-10340-9 |
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