IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/123196.html

Migration fears and exchange rate volatility in France, Germany, and the UK: A GARCH-MIDAS framework

Author

Listed:
  • Olaniran, Abeeb
  • Akanni, Lateef
  • Salisu, Afees

Abstract

We explore the role of fear associated with migration in predicting exchange rate volatility of Germany, France, and the United Kingdom within the context of the generalized autoregressive conditional heteroscedastic (GARCH) mixed-data-sampling (MIDAS) framework using United States dollar (USD) as the reference currency. While we adopt the quarterly Migration Fear Index and daily exchange rate of Euro (for France and Germany) and GBP (for the UK) to USD for the nexus between migration anxiety and exchange rate volatility, we equally augment our model with Migration Policy Uncertainty (MPU) to examine the joint predictability of the two migration fears proxies on exchange rate volatility. We conduct an empirical analysis that covers the full sample period which is further partitioned into pre- and post-GFC periods to see if the nexus is sensitive to crises periods. We find evidence of migration fears predicting exchange rate volatility of the G-3 country considered, given the statistical significance of our model’s slope coefficient. Although the influence of migration fears on the strengths of the euro and pounds relative to the USD differ, as migration fear causes the former to depreciate and the latter to appreciate, both currencies exhibit high volatility persistence during the period under scrutiny. Our findings have implications for policy-makers on whose shoulders the responsibility of exchange rate management falls.

Suggested Citation

  • Olaniran, Abeeb & Akanni, Lateef & Salisu, Afees, 2024. "Migration fears and exchange rate volatility in France, Germany, and the UK: A GARCH-MIDAS framework," MPRA Paper 123196, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:123196
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/123196/1/MPRA_paper_123196.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin Kahanec & Klaus F. Zimmermann (ed.), 2016. "Labor Migration, EU Enlargement, and the Great Recession," Springer Books, Springer, number 978-3-662-45320-9, March.
    2. DavidG. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages 136-182, February.
    3. Constant, Amelie F., 2011. "Sizing It Up: Labor Migration Lessons of the EU Enlargement to 27," IZA Discussion Papers 6119, IZA Network @ LISER.
    4. Arthur Korus & Kaan Celebi, 2019. "The impact of Brexit news on British pound exchange rates," International Economics and Economic Policy, Springer, vol. 16(1), pages 161-192, March.
    5. Michael Donadelli & Luca Gerotto & Marcella Lucchetta & Daniela Arzu, 2020. "Immigration, uncertainty and macroeconomic dynamics," The World Economy, Wiley Blackwell, vol. 43(2), pages 326-354, February.
    6. Singer, David Andrew, 2010. "Migrant Remittances and Exchange Rate Regimes in the Developing World," American Political Science Review, Cambridge University Press, vol. 104(2), pages 307-323, May.
    7. Czudaj, Robert L., 2018. "Is equity market volatility driven by migration fear?," Finance Research Letters, Elsevier, vol. 27(C), pages 34-37.
    8. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    9. Salisu, Afees A. & Ogbonna, Ahamuefula E. & Lasisi, Lukman & Olaniran, Abeeb, 2022. "Geopolitical risk and stock market volatility in emerging markets: A GARCH – MIDAS approach," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    Full references (including those not matched with items on IDEAS)

    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. Hadhri, Sinda, 2024. "The role of migration fear in (dis)connecting stock markets," Finance Research Letters, Elsevier, vol. 61(C).
    2. Neto, David, 2025. "Does geopolitical distress tip the European financial stock markets into a great uncertainty regime?," Research in Economics, Elsevier, vol. 79(3).
    3. Abdullah Alhassan & Mary E. Burfisher & Mr. Julian T Chow & Ding Ding & Fabio Di Vittorio & Dmitriy Kovtun & Arnold McIntyre & Ms. Inci Ötker & Marika Santoro & Lulu Shui & Karim Youssef, 2020. "Is the Whole Greater than the Sum of its Parts? Strengthening Caribbean Regional Integration," IMF Working Papers 2020/008, International Monetary Fund.
    4. Martin Kahanec & Mariola Pytliková, 2017. "The economic impact of east–west migration on the European Union," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(3), pages 407-434, August.
    5. Yang, Jianlei, 2024. "Financial stability policy and downside risk in stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    6. Marangoz, Cumali & Gerekan, Bekir & Yılmaz, Erdal & Bulut, Emre, 2025. "Disentangling geopolitical risks: A quantile approach to geopolitical risk indices’ impacts on stock markets," Finance Research Letters, Elsevier, vol. 77(C).
    7. Hammer, Luisa & Hertweck, Matthias Sebastian, 2022. "EU Enlargement and (Temporary) Migration: Effects on Labour Market Outcomes in Germany," VfS Annual Conference 2022 (Basel): Big Data in Economics 264082, Verein für Socialpolitik / German Economic Association.
    8. Xie, Qichang & Bai, Yu & Jia, Nanfei & Xu, Xin, 2024. "Do macroprudential policies reduce risk spillovers between energy markets?: Evidence from time-frequency domain and mixed-frequency methods," Energy Economics, Elsevier, vol. 134(C).
    9. Ha, Le Thanh, 2025. "Measuring the contemporal and lead connectedness level between investor sentiment and exchange rate dynamics in Vietnam: Novel findings from TVP-VAR-SV technique," International Economics, Elsevier, vol. 181(C).
    10. Åslund, Olof & Engdahl, Mattias, 2013. "Open borders, transport links and local labor markets," Working Paper Series 2013:9, Uppsala University, Department of Economics.
    11. Lai, Fujun & Wang, Fuxiang & Li, Yunzhong & Shum, Wai Yan, 2025. "Global geopolitical risk and stock price informativeness," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 2279-2297.
    12. Haifei Wang & Ekaterina Isupova, 2025. "National or Global Uncertainty: Which Has a Greater Impact on Investment Demand?," SAGE Open, , vol. 15(3), pages 21582440251, July.
    13. Salisu, Afees A. & Ogbonna, Ahamuefula E. & Gupta, Rangan & Bouri, Elie, 2025. "Forecasting spot and futures price volatility of agricultural commodities: The role of climate-related migration uncertainty," Research in International Business and Finance, Elsevier, vol. 80(C).
    14. Michael Donadelli & Luca Gerotto & Marcella Lucchetta & Daniela Arzu, 2018. "Migration Fear, Uncertainty, and Macroeconomic Dynamics," Working Papers 2018:29, Department of Economics, University of Venice "Ca' Foscari".
    15. Beirne, John & Renzhi, Nuobu, 2026. "Geopolitical risk, capital flow volatility, and asset market spillovers," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    16. Martin Kahanec, 2015. "Labour market impacts of post-enlargement migration on hosts and stayers in EU labour markets," Transfer: European Review of Labour and Research, , vol. 21(3), pages 359-372, August.
    17. Choi, Sun-Yong, 2024. "Sectoral responses to economic policy uncertainty and geopolitical risk in the US stock market," Journal of Multinational Financial Management, Elsevier, vol. 76(C).
    18. Kai‐Hua Wang & Zu‐Shan Wang & Hong‐Wen Liu & Xin Li, 2023. "Economic policy uncertainty and geopolitical risk: evidence from China and Southeast Asia," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(2), pages 96-118, November.
    19. Khraiche, Maroula & Boudreau, James W. & Chowdhury, Md Shahedur R., 2023. "Geopolitical risk and stock market development," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    20. Michele Costola & Michael Donadelli & Luca Gerotto & Ivan Gufler, 2022. "Global risks, the macroeconomy, and asset prices," Empirical Economics, Springer, vol. 63(5), pages 2357-2388, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:123196. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.