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Increasing exchange rate volatility during the recent float

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  • Michael Frommel
  • Lukas Menkhoff

Abstract

The paper examines empirically whether the volatility of major floating exchange rates shows any systematic change during the period from 1973 to 1998. Four measures for unconditional and conditional volatility demonstrate increasing volatility for most currencies and for two worldwide baskets of exchange rates. Structural breaks are identified for several exchange rates, implying that the volatility increase is in some cases due to upward shifts and not due to continuous changes. This may indicate that in addition to permanent microstructural impacts, macroeconomically-caused shifts are possibly also important for the volatility increase.

Suggested Citation

  • Michael Frommel & Lukas Menkhoff, 2003. "Increasing exchange rate volatility during the recent float," Applied Financial Economics, Taylor & Francis Journals, vol. 13(12), pages 877-883.
    • Handle: RePEc:taf:apfiec:v:13:y:2003:i:12:p:877-883
    DOI: 10.1080/0960310022000035847
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    Cited by:

    1. Michael Frömmel, 2010. "Volatility Regimes in Central and Eastern European Countries’ Exchange Rates," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(1), pages 2-21, February.
    2. Zhijie Xiao & Luiz Renato Lima, 2007. "Testing Covariance Stationarity," Econometric Reviews, Taylor & Francis Journals, vol. 26(6), pages 643-667.
    3. Myint Moe Chit & Marian Rizov & Dirk Willenbockel, 2010. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," The World Economy, Wiley Blackwell, vol. 33(2), pages 239-263, February.
    4. Mohamed Ibrahim Nor & Tajul Ariffin Masron, 2018. "Do the Global Oil Price Shocks Affect Somalia s Unregulated Exchange Rate Volatility?," International Journal of Energy Economics and Policy, Econjournals, vol. 8(2), pages 154-161.
    5. Mohamed Ibrahim Nor & Tajul Ariffin Masron & Tariq Tawfeeq Yousif Alabdullah, 2020. "Macroeconomic Fundamentals and the Exchange Rate Volatility: Empirical Evidence From Somalia," SAGE Open, , vol. 10(1), pages 21582440198, January.

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