Exchange rate volatility and exchange rate uncertainty in Nigeria: a financial econometric analysis (1970- 2012)
AbstractThis research paper examines exchange rate volatility over time (1970-2012) using the Generalized Autoregressive Conditional Heteroscedasticity (AR GARCH) model of the Maximum Likelihood techniques. Our AR GARCH result showed that lagged (last year) exchange rate is significantly responsible for the dynamics of Naira/ Dollar exchange rate in Nigeria. Most glaring is that our ARCH and GARCH parameters indicate that exchange rate volatility shocks are rather persistent in Nigeria. We also find that exchange rate uncertainty has a direct relationship with current exchange rate in Nigeria. Further, the Granger causality test conducted shows that the direction of causality is more powerful and significant from exchange rate uncertainty to actual exchange rate in Nigeria. Thus the paper suggests a proper management of exchange rate, to forestall costly distortions in the Nigerian economy.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 48316.
Date of creation: 2013
Date of revision: 2013
GARCH Models; Financial Econometrics; Foreign Exchange rate; Monetary Policy;
Find related papers by JEL classification:
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
- F31 - International Economics - - International Finance - - - Foreign Exchange
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