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An ARCH/GARCH Approach on Euro/RON Exchange Rate Volatility

Author

Listed:
  • Luciana Simion

    (The Bucharest University of Economic Studies)

  • Antonia Mihai

    (The Bucharest University of Economic Studies)

Abstract

Our study investigates the influence of political events, such as elections, censure motions, and economic policies, on the financial markets. We analyzed using ARCH/ GARCH models daily EURORon exchange rates from January 2017 to December 2020 to highlight the interconnection between political and economic shocks and the volatility of the financial markets. The results indicate a strong correlation between turbulence caused by political events and decisions and the volatility of the exchange rates in the studied period. It is necessary to understand better this link between the political factor and the effects that economic measures have on financial markets, especially in the current economic context, health, and, financial crisis generated by the COVID-19 pandemic, which caused governments to respond in unprecedented ways and lead to exceptional measures.

Suggested Citation

  • Luciana Simion & Antonia Mihai, 2021. "An ARCH/GARCH Approach on Euro/RON Exchange Rate Volatility," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1145-1152, December.
    • Handle: RePEc:ovi:oviste:v:xxi:y:2021:i:2:p:1145-1152
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    More about this item

    Keywords

    politics; exchange rate; volatility; Garch;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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