A Conditional Variance Model for Daily Deviations of an Exchange Rate

Milhøj, Anders

doi:10.1080/07350015.1987.10509564

Cited by 66 publications

(16 citation statements)

References 8 publications

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“…Empirical work indicates that exchange-rate volatility behaves according to a GARCH )Generalized Auto-Regressive Conditional Heteroscedasticity) model that was developed by [29].According to the model, fluctuations in the exchange rate during a given period depend on fluctuations in the exchange rate in the preceding periods [30][31][32][33]. Recent studies confirmed that the GARCH(1,1) model is the most appropriate measure of exchange-rate volatility [34,35].…”

Section: Methodsmentioning

confidence: 99%

The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”?

2019

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The natural gas revolution in Israel started about two decades ago. Its numerous social impacts include moving to cleaner energy, improving energy security and the balance of trade, tightening international relations, and increasing tax revenue. However, “Dutch disease” phenomena—where the accelerated export of natural gas leads to the strengthening of the local currency, the subsequent weakening of other exporting industries, and rising unemployment—might suck Israel into the economic slowdown. This study examines whether the strengthening of the New Israeli Shekel (ILS) in recent years is a symptom of “Dutch disease”. It is expected that the large-scale export of natural gas will start in 2021 with the development of the major offshore field “Leviathan”. Notably, ILS has been appreciating for several years already. We employed the event study approach to analyze the fluctuations of the daily ILS/USD real exchange rate in the years 2009–2017, combined with the media announcements related to the gas discoveries published during this period. The results revealed that gas-related news does affect the exchange rate and appreciate ILS. GARCH analysis confirms the results.

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Section: Methodsmentioning

confidence: 99%

The Symptoms of Illness: Does Israel Suffer from “Dutch Disease”?

2019

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“…While analyses of the risk premium in the forward market have been hampered by a focus on data of relatively low frequency, recent analyses by Baillie and Bollersev (1989), Hsieh (1988), and Milhoj (1987) have supported the application of GARCH to the analysis of daily exchange-rate movements.…”

Section: Related Literaturementioning

confidence: 99%

“…GARCH allows for a conditionally normal distribution that is unconditionally symmetric and leptokurtic. GARCH has been extensively utilized to model exchange-rate volatility (see Engle and Bollersev 119861, Bollersev [1987], Hsieh [1989], Diebold and Nerlove [1989], McCurdy and Morgan [1989], and Milhoj [1987]). Baillie and Bollersev (1989) modify GARCH to consider a conditionally leptokurtic distribution that is capable of accounting for severe leptokurtosis in the daily data.…”

Section: Related Literaturementioning

confidence: 99%

The Risk Premium in Forward Foreign Exchange Markets and G-3 Central Bank Intervention : Evidence of Daily Effects, 1985-1990

Baillie¹,

Osterberg²

1991

Working Paper (Federal Reserve Bank of Cleveland)

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“…Accordingly, this study employs the bootstrap method to explore which of the following three popular random walks 2 best portrays the evolution of the Chinese yuan: IID-parameterized random walk, an ARCH(3)-1 See Funke and Rahn (2005), Goh and Kim (2006), and Ogawa and Sakane (2006). 2 See Giddy and Duffy (1975), Mussa (1979), Meese and Rogoff (1983), Milhoj (1987), Hsieh (1988), Baillie and Bollerslev (1989), and Diebold and Nerlove (1989). parameterized random walk, and a GARCH(1,1)-parameterized random walk 3 .…”

Section: Introductionmentioning

confidence: 99%