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Modeling Sources of Asymmetry in the Volatility of the Moroccan Dirham Exchange Rate

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  • KHATTAB Ahmed
  • SALMI Yahya

Abstract

The main objective of this paper is to study the sources of asymmetry in the volatility of the bilateral exchange rates of the Moroccan dirham (MAD), against the EUR and the USD using the asymmetric econometric models of the ARCH-GARCH family. An empirical analysis was conducted on daily central bank data from March 2003 to March 2021, with a sample size of 4575 observations. Central bank intervention in the foreign exchange (interbank) market was found to affect the asymmetry in the volatility of the bilateral EUR/MAD and USD/MAD exchange rates. Specifically, sales of foreign exchange reserves by the monetary authority cause a fall in the exchange rate, which means that the market response to shocks is asymmetric. Finally, the selection criterion (AIC) allowed us to conclude that the asymmetric model AR(1)-TGARCH(1,1) is adequate for modeling the volatility of the exchange rate of the Moroccan dirham.

Suggested Citation

  • KHATTAB Ahmed & SALMI Yahya, 2021. "Modeling Sources of Asymmetry in the Volatility of the Moroccan Dirham Exchange Rate," Applied Economics and Finance, Redfame publishing, vol. 8(4), pages 31-41, July.
    • Handle: RePEc:rfa:aefjnl:v:8:y:2021:i:4:p:31-41
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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