On the Macroeconomic Causes of Exchange Rate Volatility: The Case of Tunisia
DOI:
https://doi.org/10.1956/jge.v13i1.445Keywords:
Keywords, exchange rate, fundamental macroeconomic variables, conditional heteroskedasticity models.Abstract
Abstract:
The modeling of the dynamics of the exchange rate at a long time remains a financial and economic research center. In our research we tried to study the relationship between the evolution of exchange rates and macroeconomic fundamentals. Our empirical study is based on a series of exchange rates for the Tunisian dinar against three currencies of major trading partners (dollar, euro, yen) and fundamentals (the terms of trade, the inflation rate, the interest rate differential), of monthly data, from jan 2000 to dec-2014, for the case of  Tunisia. We have adopted models of conditional heteroscedasticity (ARCH, GARCH, EGARCH, TGARCH). The results indicate that there is a partial relationship between the evolution of the Tunisian dinar exchange rates and macroeconomic variables.
Keywords: exchange rate, fundamental macroeconomic variables, conditional heteroskedasticity models.
References
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Cho, D., & West, K. D. (2003). Interest rates and exchange rates in the Korean, Philippine, and Thai exchange rate crises. In Managing currency crises in emerging markets (pp. 11-36). University of Chicago Press.â€
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Eichenbaum, M., & Evans, C. L. (1995). mSome Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates, n2H6EG: E@ K. CHEB6@ C.â€
Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica: Journal of the Econometric Society, 987-1007.â€
Faust, J., & Rogers, J. H. (2003). Monetary policy's role in exchange rate behavior. Journal of Monetary Economics, 50(7), 1403-1424.
Giannellis, N., & Papadopoulos, A. P. (2011). What causes exchange rate volatility? Evidence from selected EMU members and candidates for EMU membership countries. Journal of International Money and Finance, 30(1), 39-61.
Hausmann, R., Panizza, U., & Rigobon, R. (2006). The long-run volatility puzzle of the real exchange rate. Journal of International Money and Finance, 25(1), 93-124.â€
Kim, S., & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach. Journal of Monetary Economics, 45(3), 561-586.â€
KoÄenda, E., & Valachy, J. (2006). Exchange rate volatility and regime change: A Visegrad comparison. Journal of Comparative Economics, 34(4), 727-753.â€
Mishkin, F. S., & Savastano, M. A. (2001). Monetary policy strategies for Latin America. Journal of Development Economics, 66(2), 415-444.â€
Nelson, D. B. (1991). Conditional heteroskedasticity in asset returns: A new approach. Econometrica: Journal of the Econometric Society, 347-370.
Pétursson, Þ. G. (2009). Does inflation targeting lead to excessive exchange rate volatility?
Rogers, J. H. (1999). Monetary shocks and real exchange rates. Journal of International Economics, 49(2), 269-288.â€
Andersen, T. G., Bollerslev, T., Diebold, F. X., & Vega, C. (2003). Micro effects of macro announcements: Real-time price discovery in foreign exchange. American Economic Reviews 93, 38–62.
Baillie, R. T., Bollerslev, T., & Mikkelsen, H. O. (1996). Fractionally integrated generalized autoregressive conditional heteroskedasticity. Journal of econometrics, 74(1), 3-30.â€
Bhar, R., Kim, S. J., & Pham, T. M. (2004). Exchange rate volatility and its impact on the transaction costs of covered interest rate parity. Japan and the World Economy, 16(4), 503-525.
Bissoondeeal, R. K., Karoglou, M., & Gazely, A. M. (2011). Forecasting the UK/US exchange rate with divisia monetary models and neural networks. Scottish journal of political economy, 58(1), 127-152.
Chadha, J. S., & Nolan, C. (1999). Inflation targeting, transparency and interest rate volatility: ditching “monetary mystique†in the UK. University of Cambridge.Cambridge Working Papers N° 9921.
Chen, S. S. (2006). Revisiting the interest rate–exchange rate nexus: a Markov-switching approach. Journal of Development Economics, 79(1), 208-224.â€
Cho, D., & West, K. D. (2003). Interest rates and exchange rates in the Korean, Philippine, and Thai exchange rate crises. In Managing currency crises in emerging markets (pp. 11-36). University of Chicago Press.â€
Clarida, R., & Gali, J. (1994, December). Sources of real exchange-rate fluctuations: How important are nominal shocks?. In Carnegie-Rochester conference series on public policy (Vol. 41, pp. 1-56). North-Holland.â€
Coudert, V., Couharde, C., & Mignon, V. (2009). Termes de l'échange et taux de change : Un lien troublé par les politiques d'ancrage. La lettre de CEPII.
Duarte, A. P., Andrade, J. S., & Duarte, A. (2008). Exchange rate and interest rate volatility in a target zone: the Portuguese case.â€
Edwards, S. (2010). Left behind: Latin America and the false promise of populism. University of Chicago press.â€
Eichenbaum, M., & Evans, C. L. (1995). mSome Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates, n2H6EG: E@ K. CHEB6@ C.â€
Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica: Journal of the Econometric Society, 987-1007.â€
Faust, J., & Rogers, J. H. (2003). Monetary policy's role in exchange rate behavior. Journal of Monetary Economics, 50(7), 1403-1424.
Giannellis, N., & Papadopoulos, A. P. (2011). What causes exchange rate volatility? Evidence from selected EMU members and candidates for EMU membership countries. Journal of International Money and Finance, 30(1), 39-61.
Hausmann, R., Panizza, U., & Rigobon, R. (2006). The long-run volatility puzzle of the real exchange rate. Journal of International Money and Finance, 25(1), 93-124.â€
Kim, S., & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach. Journal of Monetary Economics, 45(3), 561-586.â€
KoÄenda, E., & Valachy, J. (2006). Exchange rate volatility and regime change: A Visegrad comparison. Journal of Comparative Economics, 34(4), 727-753.â€
Mishkin, F. S., & Savastano, M. A. (2001). Monetary policy strategies for Latin America. Journal of Development Economics, 66(2), 415-444.â€
Nelson, D. B. (1991). Conditional heteroskedasticity in asset returns: A new approach. Econometrica: Journal of the Econometric Society, 347-370.
Pétursson, Þ. G. (2009). Does inflation targeting lead to excessive exchange rate volatility?
Rogers, J. H. (1999). Monetary shocks and real exchange rates. Journal of International Economics, 49(2), 269-288.â€
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Published
31.03.2017
How to Cite
charef, fahima (2017) “On the Macroeconomic Causes of Exchange Rate Volatility: The Case of Tunisia”, Journal of Global Economy, 13(1), pp. 3–16. doi: 10.1956/jge.v13i1.445.
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