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The Volatility of Romanian Exchange Rate: A GARCH Approach

Author

Listed:
  • Elena Pelinescu

    (Institute of Economic Forecasting, Romanian Academy 13 September Street, Bucharest, 050711, ROMANIA)

  • Delia-Elena Diacona?u

    (Faculty of Economics and Business Administration, ¡°Alexandru Ioan Cuza¡± University of Ia?i 22 Carol I Boulevard, Ia?i, 700505, ROMANIA)

Abstract

The perspective of Romania adopting the Euro in year 2019 increases the interest of decision-makers and researchers regarding the volatility of the Romanian exchange rate. In this context, the aim of our paper is to analyze the means in which the economic crisis determines mutations in the features of the exchange rate variations in Romania during the period January 1st, 2007¨CMarch 16th, 2015. We employ non-parametric and parametric volatility measures, namely the rolling-sample volatility and the GARCH models in order to identify the national versus international macroeconomic determinants of exchange rate fluctuations. Our results generally support that, in both pre- and post-structural break periods, the main driver of the volatility of EUR/RON is the foreign exchange rate, followed by the international interest rate. However, there is a relevant difference between the two analyzed periods: the influence of the RON/ZLP exchange rate.

Suggested Citation

  • Elena Pelinescu & Delia-Elena Diacona?u, 2015. "The Volatility of Romanian Exchange Rate: A GARCH Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 5, pages 92-99, November.
    • Handle: RePEc:bap:journl:150406
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    References listed on IDEAS

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    More about this item

    Keywords

    Macroeconomic variables; Structural break; Rolling-sample volatility; GARCH models; Emerging market;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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