IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2016-03-51.html

Exchange Rate Volatility and Central Bank Actions in Egypt: Generalized Autoregressive Conditional Heteroscedasticity Analysis

Author

Listed:
  • Marwa A. Elsherif

    (Department of Economics, Helwan University, Cairo, Egypt.)

Abstract

Egypt has passed through different development stages, followed different exchange rate regime at each, ranging from fixed to floating. This study tries to examine empirically how Central Bank of Egypt actions influence exchange rate volatility using generalized autoregressive conditional heteroscedasticity (1,1) model under Gaussian normal distribution, considering monthly observations of Egyptian Pound against US Dollar, spanning the period from 2003 after the adoption of floating exchange rate regime till 2014. The model includes three exogenous variables as they can contribute to the exchange rate volatility; interest rate differentials, trade balance and official reserves. Results show the presence of volatility clustering but this volatility shocks are not so quite persistent. Central Bank actions impacted exchange rate volatility positively through interest rate, and negatively through reserves amount. Finding solutions to trade deficits to encourage exports and tackle down imports can hinder exchange rate volatility in Egypt.

Suggested Citation

  • Marwa A. Elsherif, 2016. "Exchange Rate Volatility and Central Bank Actions in Egypt: Generalized Autoregressive Conditional Heteroscedasticity Analysis," International Journal of Economics and Financial Issues, International Journal of Economics and Financial Issues, vol. 6(3), pages 1209-1216.
    • Handle: RePEc:eco:journ1:2016-03-51
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/2592/pdf
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijefi/article/view/2592/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dominguez, Kathryn M., 1998. "Central bank intervention and exchange rate volatility1," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 161-190, February.
    2. Michael D. Bordo & Anna J. Schwartz, 1996. "The Specie Standard As A Contingent Rule: Some Evidence for Core and Peripheral Countries, 1880-90," Departmental Working Papers 199411, Rutgers University, Department of Economics.
    3. Ibrahim L. AWAD, 2008. "Is Egypt Ready to Apply Inflation Targeting Regime?," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 2, pages 141-159, November.
    4. Dailami, Mansoor & Hinh T. Dinh, 1991. "Interest rate policy in Egypt : its role in stabilization and adjustment," Policy Research Working Paper Series 655, The World Bank.
    5. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    6. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joseph Osaro Denwi & Nenubari John Ikue & Joseph Jite Onodjaefe & Mtomabari Simeon, 2022. "Trade Liberalization Policy and Economic Growth in Africa: A Threshold Analysis," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(7), pages 178-188, October.
    2. N. Suresh & N. R. Bharathi, 2022. "Effect of Demonetisation of on Indian High Denomination Currencies on Indian Stock Market and its Relationship with Foreign Exchange Rate," Papers 2207.06963, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ata Ozkaya & Omer Altun, 2024. "Domestic and Global Causes for Exchange Rate Volatility: Evidence From Turkey," SAGE Open, , vol. 14(2), pages 21582440241, April.
    2. Sikarwar, Ekta, 2020. "Forex interventions and exchange rate exposure: Evidence from emerging market firms," Economic Modelling, Elsevier, vol. 93(C), pages 69-81.
    3. Phornchanok Cumperayot & Casper G. de Vries, 2006. "Large Swings in Currencies driven by Fundamentals," Tinbergen Institute Discussion Papers 06-086/2, Tinbergen Institute.
    4. Arif Oduncu & Yasin Akcelik & Ergun Ermisoglu, 2013. "Reserve Options Mechanism : A New Macroprudential Tool to Limit the Adverse Effects of Capital Flow Volatility on Exchange Rates," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(3), pages 45-60.
    5. Eric Hillebrand, 2003. "The Effects of Japanese Foreign Exchange Intervention: GARCH Estimation and Change Point Detection," Departmental Working Papers 2003-10, Department of Economics, Louisiana State University.
    6. Sideris, Dimitrios A., 2008. "Foreign exchange intervention and equilibrium real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(4), pages 344-357, October.
    7. Bahram Adrangi & Mary Allender & Kambiz Raffiee, 2011. "An Ex-Post Empirical Investigation of the Efficacy of Central Bank Interventions in Currency Markets: Bilateral Exchange Rate of the Dollar," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 19-34, August.
    8. repec:ere:journl:v:xxxiv:y:2015:i:2:p:63-78 is not listed on IDEAS
    9. Hoshikawa, Takeshi, 2008. "The effect of intervention frequency on the foreign exchange market: The Japanese experience," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 547-559, June.
    10. Piti Disyatat & Gabriele Galati, 2005. "The effectiveness of foreign exchange intervention in emerging market countries," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 97-113, Bank for International Settlements.
    11. repec:fgv:epgrbe:v:66:n:3:a:3 is not listed on IDEAS
    12. Carlos E. da Costa & Jaime de Jesus Filho & Paulo Matos, 2016. "Forward-premium puzzle: is it time to abandon the usual regression?," Applied Economics, Taylor & Francis Journals, vol. 48(30), pages 2852-2867, June.
    13. Matos, Paulo & Beviláqua, Giovanni & Filho, Jaime, 2012. "Previsão do câmbio real-dólar sob um arcabouço de apreçamento de ativos," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 66(3), October.
    14. Michael Funke & Julius Loermann & Andrew Tsang, 2022. "Volatility transmission and volatility impulse response functions in the main and the satellite Renminbi exchange rate markets," Review of International Economics, Wiley Blackwell, vol. 30(2), pages 606-628, May.
    15. Fischer, Andreas M. & Isakova, Gulzina & Termechikov, Ulanbek, 2009. "Do FX traders in Bishkek have similar perceptions to their London colleagues?: Survey evidence of market practitioners' views," Journal of Asian Economics, Elsevier, vol. 20(2), pages 98-109, March.
    16. Kwame Osei-Assibey, 2014. "Sign asymmetry and exchange rate market volatility: empirical evidence from two developing countries," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 7(2), pages 107-121.
    17. Pierdzioch, Christian, 2000. "The Effectiveness of the FX Market Interventions of the Bundesbank During the Louvre Period: An Options-Based Analysis," Kiel Working Papers 971, Kiel Institute for the World Economy.
    18. Sudhanshu Kumar & Naveen Srinivasan & Muthiah Ramachandran, 2012. "A time‐varying parameter model of inflation in India," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 5(1), pages 25-50, April.
    19. Daniel Stavarek, 2011. "European exchange rates volatility and its asymmetrical components during the financial crisis," MENDELU Working Papers in Business and Economics 2011-17, Mendel University in Brno, Faculty of Business and Economics.
    20. Hyun Kook Shin & Byoung Hark Yoo, 2012. "The Volatility Of The Won-Dollar Exchange Rate During The 2008-9 Crisis," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(4), pages 61-77, December.
    21. Eric Hillebrand & Gunther Schnabl, 2008. "A structural break in the effects of Japanese foreign exchange intervention on yen/dollar exchange rate volatility," International Economics and Economic Policy, Springer, vol. 5(4), pages 389-401, December.
    22. Michel Beine & Agnès Bénassy-Quéré & Christelle Lecourt, 1999. "The Impact of Foreign Exchange Interventions: New Evidence from FIGARCH Estimations," Working Papers 1999-14, CEPII research center.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2016-03-51. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Monica Sinhat (email available below). General contact details of provider: https://econjournals.com/index.php/ijefi .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.