Information content of exchange rate volatility: Turkish experience
AbstractThis 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19598.
Date of creation: Apr 2007
Date of revision:
Publication status: Published in International Business and Economics Research Journal 2.6(2007): pp. 9-14
Exchange Rate Volatility ; News Impact ; Turkish Economy;
Find related papers by JEL classification:
- C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
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