Essays on exchange rate volatility

Rights statement
Awarding institution
  • University of Strathclyde
Date of award
  • 2010
Thesis identifier
  • T12481
Qualification Level
Qualification Name
Department, School or Faculty
  • This thesis explores a number of aspects of time series modelling of exchange rate volatility. After having reviewed the main modelling approaches used in the existing literature, the first key chapter investigates the best models for forecasting the volatility of daily exchange rate returns for a number of countries, including new results for a selection of developing countries. The superior performance of the FIGARCH model, noted in the recent literature, is confirmed in the case of industrialised countries, but the MARCH model results in substantial gains in insample estimation and out-of-sample forecasting performance when dealing with developing countries. The next essay investigates exchange rate volatility co-movements and spillovers before and after the launch of the Euro. This study has the advantage of a longer sample period than the most comparable papers. Key results are that the dominance of the Deutschemark in volatility transmission was succeeded by the dominance of the Euro following its launch, in that both exert unidirectional and persistent spillovers on the sterling, the Swiss franc and the Japanese yen. Further, there is evidence of greater stability in financial markets after the launch of the Euro in that conditional variances, covariances and correlations in exchange rate returns declined significantly. Finally the thesis turns to assessing the impact of official central bank interventions (CB1s) on exchange rate returns, their volatility and bilateral correlations. By exploiting the recent publication of intervention data by the Bank of England, this study is able to investigate interventions by a total number of four central banks, while the previous studies have been limited to three (the Federal Reserve, Bundesbank and Bank of Japan). The results of the existing literature are reappraised and refined. In particular, unilateral CBI is found to be more successful than coordinated CBI. The likely implications of these findings are then discussed.
Resource Type
Date Created
  • 2010
Former identifier
  • 808216