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The volatility of exchange rate between the US dollar and African emerging currencies: analysing by GAS-GARCH-Student-t model

Author

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  • Abdelkader Derbali
  • Aida Sy

Abstract

The fundamental study focuses on estimating the volatility of exchange rate returns between the US dollar and African emerging currencies based on GAS-GARCH-student t model. Moreover, we employ the GAS-GARCH-student-t to update the time-varying parameter using the scaled score function of the likelihood function. Empirically, the paper utilises daily exchange rate data between the US dollar and three African emerging currencies (Egyptian Pound, Nigerian Naira, and South African Rand) spanning from January 1, 2000 to December 31, 2014. Clearly, it is found that the exchange rate returns between the US dollar and African emerging currencies undergo from the volatility clustering phenomenon and that there exists a highly time-varying variance in the exchange rate series that has to be appropriately dealt with, while modelling exchange rates return series. Thus, we can show the existence of high dependence between the US dollar and the African emerging currencies which explain the economic and financial dependency between the USA and the African emerging countries.

Suggested Citation

  • Abdelkader Derbali & Aida Sy, 2016. "The volatility of exchange rate between the US dollar and African emerging currencies: analysing by GAS-GARCH-Student-t model," International Journal of Critical Accounting, Inderscience Enterprises Ltd, vol. 8(2), pages 132-143.
    • Handle: RePEc:ids:ijcrac:v:8:y:2016:i:2:p:132-143
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