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The Volatility of the Norwegian Currency Basket

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  • Mundaca, B Gabriela

Abstract

The Norwegian currency basket and the NOK/USD exchange rate observed at two different times of the day are modeled as ARCH or GARCH processes. The analysis yields four main conclusions. First, the conditional variance of the basket index is smaller than the conditional variance of the NOK/USD exchange rate. Second, the estimated conditional variances depend on which hour of the day the daily observations were collected. Third, the GARCH model fits the data better than the ARCH model for three of the four series analyzed. Further, neither model accounts for much of the large kurtosis found in the Norwegian currency basket. Copyright 1991 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Mundaca, B Gabriela, 1991. "The Volatility of the Norwegian Currency Basket," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 53-73.
    • Handle: RePEc:bla:scandj:v:93:y:1991:i:1:p:53-73
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    Cited by:

    1. Gentjan ÇERA & Eda Dokle & Edmond Çera, 2015. "Do The News Affect The Eur/All Exchange Rate Volatility?," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 13(1), pages 21-28, May.
    2. Dritsaki, Chaido, 2019. "Modeling the Volatility of Exchange Rate Currency using GARCH Model," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 72(2), pages 209-230.
    3. Duijm, Bernhard & Nürk, Bettina, 1991. "Die währungspolitische Annäherung Skandinaviens and die Europäische Gemeinschaft," Tübinger Diskussionsbeiträge 16, University of Tübingen, School of Business and Economics.
    4. Holden, Steinar & Kolsrud, Dag, 1999. "Noisy signals in target zone regimes:: Theory and Monte Carlo experiments," European Economic Review, Elsevier, vol. 43(8), pages 1531-1567, August.
    5. Mundaca, B. Gabriela, 2001. "Central bank interventions and exchange rate band regimes," Journal of International Money and Finance, Elsevier, vol. 20(5), pages 677-700, October.
    6. Das, Suman & Roy, Saikat Sinha, 2023. "Following the leaders? A study of co-movement and volatility spillover in BRICS currencies," Economic Systems, Elsevier, vol. 47(2).
    7. Fathi Abid & Moncef Habibi, 2010. "Hedging Transaction Exposure within the Context of a Basket Foreign Exchange Rate Arrangement," Working Papers 523, Economic Research Forum, revised 05 Jan 2010.

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