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Estimating The Real Effective Exchange Rate Volatility With Arch And Garch Models


  • Serife Ozsahin
  • Dogan Uysal

    () (Selcuk University
    Celal Bayar University)


Since real effective exchange rate is the key relative price in international finance, it is required to model sudden changes in the short-run properly. Models which ignore the volatility of these changes would cause erroneous conclusions with regards to relationship among variables. Studies done to model real effective exchange rate generally prefer to utilize ARCH and GARCH specifications. Similarly in this study, current volatility in the TL/Dollar monthly exchange rates from March, 2001 which is the beginning point on which Turkish economy moved into a floating exchange rate regime to May, 2010 was tried to model. It was found evidence that GARCH(1,1) offers the most convenient model to adjust exchange rate volatility in the Turkish economy.

Suggested Citation

  • Serife Ozsahin & Dogan Uysal, 2012. "Estimating The Real Effective Exchange Rate Volatility With Arch And Garch Models," Anadolu University Journal of Social Sciences, Anadolu University, vol. 12(1), pages 13-20, March.
  • Handle: RePEc:and:journl:v:12:y:2012:i:1:p:13-20

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    References listed on IDEAS

    1. Bičáková, Alena & Slacalek, Jiri & Slavík, Michal, 2008. "Labor supply after transition: evidence from the Czech Republic," Working Paper Series 887, European Central Bank.
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    5. Blomquist, N. Soren, 1983. "The effect of income taxation on the labor supply of married men in Sweden," Journal of Public Economics, Elsevier, vol. 22(2), pages 169-197, November.
    6. D. Tondani, 2006. "Estimating the effects of personal income tax on labour supply in Italy," Economics Department Working Papers 2006-EP03, Department of Economics, Parma University (Italy).
    7. Alena Bièáková & Jiøí Slaèálek & Michal Slavík, 2011. "Labor Supply after Transition: Evidence from the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(4), pages 327-347, August.
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    More about this item


    Real effective exchange rate; volatility; ARIMA; ARCH and GARCH;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes


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