Modelling LKR/USD Exchange Rate Volatility: GARCH Approach
Journal Title: IOSR Journal of Economics and Finance (IOSR-JEF) - Year 2018, Vol 9, Issue 5
Abstract
Exchange Rate Volatility is a most prominent term in the financial econometrics. This Study aimed to estimate the changes in volatility of exchange rates focused on LKR/USD for the period of January 2000 to August 2018. Exchange rate return series were tested incorporating GARCH (Generalized Autoregressive Conditional Heteroscedasticity) family models with daily basis data. All the models are investigated using three different distributional approaches, Student t, Normal(Gaussian) and Generalized Error Distribution focusing on Mean variance and the conditional variance with the AR(2) effect. In-sample data were tested using forecast estimates of MASE, MAE and MAPE. Under the assumption generalized error distribution, best fitted model of measuring the LKR/USD daily exchange rate volatility is the AR(2)-GARCH(1,1) model. Final model is statistically significant at 5% confidence level and the residuals are deviate from the normality. This study reveals that the LKR/USD exchange rate returns are responding faster with the global Market fluctuations.
Authors and Affiliations
A. K. M. D. P. KandeArachchi
Keywords
Related Articles
- EP ID EP414929
- DOI 10.9790/5933-0905024454.
- Views 213
- Downloads 0
Effect of Climate Change on Maize Productivity in Kenya: A Vector Error Correction Model
As much as agriculture is the major catalyst for any nation’s economy, it relies heavily on rainfall, which has changed in terms of rainfall patterns. SSA countries (97%) rely on rain fed agriculture. these countries’ po...
Tax Amnesty Policy in Order to Achieve Awareness and Compliance of Taxpayer in Bali Province, Indonesia
One form of government efforts to boost tax receipts as well as to raise awareness and tax compliance in Indonesia, on July 1, 2016 to March 31, 2017 implemented a program called tax amnesty. Implementation of tax amnest...
Analysis And Improvement Strategy Quality Of Economic Growth in North Konawe District Province Sulawesi Tenggara - Indonesia
This research was conducted with the aim of: (1) knowing how the quality of economic growth of Konawe Utara Regency so far; (2) to analyze the factors that determine the quality of economic growth in North Konawe Regency...
Effect of Trading Activity on Financial Leverage and Financial Distress Likelihood of Listed Firms in Kenya
Over the years, numerous cases of financial distress have been witnessed among listed firms in Nairobi Securities Exchange. Trading activity affects corporate financial decisions by reducing cost of capital and facilitat...
Problems & Prospects of Microfinance Institutions–with Special Reference to Chandigarh
Microfinance is defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals which fall just above the nationally defined poverty line, and po...