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Exchange Rate Behaviour in the West Africa Monetary Zone: A GARCH Approach

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  • Oshinloye, Micheal
  • Onanuga, Olaronke
  • Onanuga, Abayomi

Abstract

This study employs Generalized Autoregressive Conditional Heteroscedasticity (GARCH) to explore the level of exchange rate volatility in West African Monetary Zone for the period 1980-2014. Our empirical findings reveal that the Gambian dalasi experiences the least volatile official exchange rate while the Liberia dollar is the most volatile in the Zone. There is the need for the government of Gambia and Nigeria to control overshooting dynamics experienced by dalasi and naira. All the countries should exercise monetary and fiscal measures on time to put their exchange rate volatility under check.

Suggested Citation

  • Oshinloye, Micheal & Onanuga, Olaronke & Onanuga, Abayomi, 2015. "Exchange Rate Behaviour in the West Africa Monetary Zone: A GARCH Approach," MPRA Paper 83324, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:83324
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    References listed on IDEAS

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    1. Brooks,Chris, 2008. "RATS Handbook to Accompany Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521896955, September.
    2. Stockman, Alan C, 1980. "A Theory of Exchange Rate Determination," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 673-698, August.
    3. Deniz Erdemlioglu & Sébastien Laurent & Christopher J. Neely, 2013. "Econometric modeling of exchange rate volatility and jumps," Chapters, in: Adrian R. Bell & Chris Brooks & Marcel Prokopczuk (ed.), Handbook of Research Methods and Applications in Empirical Finance, chapter 16, pages 373-427, Edward Elgar Publishing.
    4. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    5. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    6. Eleanor Doyle, 2001. "Exchange rate volatility and Irish-UK trade, 1979-1992," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 249-265.
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    Cited by:

    1. A. Adenekan & G. Sanni & A. Itodo, 2019. "Investigating the Impact of Exchange Rate Volatility on Naira Exchange Rate in Nigeria," Economic and Financial Review, Central Bank of Nigeria, vol. 57(3), September.

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    More about this item

    Keywords

    Exchange rate Volatility; GARCH; West African Monetary Zone;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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