Energy market uncertainties and exchange rate volatility : a GARCH-MIDAS approach
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Date
Authors
Salisu, Afees A.
Ogbonna, Ahamuefula E.
Gupta, Rangan
Ji, Qiang
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
In this paper, we employ the generalized autoregressive conditional heteroscedasticity-mixed data sampling (GARCH-MIDAS) framework to forecast the daily volatility of 19 dollar-based exchange rate returns based on monthly metrics of oil price uncertainty (OPU), and relatively broader global and country-specific energy market-related uncertainty indexes (EUI). We find that the global EUIs tend to perform better than the OPU, highlighting the need to look beyond the oil market to capture energy related uncertainties. The country-specific EUIs outperform the benchmark in a statistically significant manner for at least 14 currencies across the short-, medium-, and long-term forecasting horizons.
Description
DATA AVAILABILITY : Data will be made available on request.
Keywords
Generalized autoregressive conditional heteroskedasticity (GARCH), Mixed data sampling (MIDAS), Oil price uncertainty (OPU), Monthly oil price, Energy market uncertainty, Daily exchange rate returns volatility, GARCH-MIDAS, Forecasting, SDG-08: Decent work and economic growth
Sustainable Development Goals
SDG-08:Decent work and economic growth
Citation
Salisu, A.A., Ogbonna, A.E., Gupta, R. et al. 2024, 'Energy market uncertainties and exchange rate volatility: a GARCH-MIDAS approach', Finance Research Letters, vol. 67, art. 105847, pp. 1-7, doi : 10.1016/j.frl.2024.105847.