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Modeling and Forecasting Exchange Rate Volatility in West Africa using GARCH models

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  • Didier Dukundane

Abstract

This study empirically investigates the nature of exchange rate volatility in the context of West Africa. The study uses daily data on the exchange rates of the West African CFA franc (XOF) in terms of US Dollar. The empirical analysis has been carried out for the period from 13-11-2009 to 18-09-2023, for a total of 5058 observations. We excluded the last 25% of observations in order to evaluate the forecasting accuracy. The exchange rate volatility of the West African CFA franc against the US Dollar is estimated using GARCH models based on normal and student’s t-distribution of innovations. Results show that the ARMA(3,1)-GARCH(1,2) model with student-t distribution is well adequate model to capture the mean and the volatility process of USD-CFA exchange rate log returns. Â

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  • Didier Dukundane, 2023. "Modeling and Forecasting Exchange Rate Volatility in West Africa using GARCH models," Journal of Statistical and Econometric Methods, SCIENPRESS Ltd, vol. 12(4), pages 1-2.
    • Handle: RePEc:spt:stecon:v:12:y:2023:i:4:f:12_4_2
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