Original scientific paper
https://doi.org/10.18045/zbefri.2017.1.73
Modelling exchange rate variations and global shocks in Brazil
Harold Ngalawa
; School of Accounting, Economics & Finance, University of KwaZulu- Natal, Westville Campus, Durban, Republic of South Africa
Adebayo Augustine Kutu
; School of Accounting, Economics & Finance, University of KwaZulu-Natal, Westville Campus, Durban, Republic of South Africa
Abstract
The purpose of this paper is to model variations of Brazil’s exchange rates and global shocks in order to establish if global oil prices and international interest rates (global shocks) have any impact on exchange rate variations in Brazil. After establishing the existence of ARCH effects and ensuring the stationarity of the data set, we estimate the symmetric GARCH (1,1) model along with two asymmetric EGARCH (1,1) and APARCH (1,1) models using the theoretical model of Kamal et al. (2012). The results show that the GARCH (1,1) model provides the best fit for Brazil’s exchange rate variations while the model selection chooses the Student’s t distribution as the preferable model of good fit compared to the alternatives. The study results show that Brazil’s exchange rates are significantly influenced by global shocks. Accordingly, we recommend that the Brazilian government should consider the impact of oil prices and global interest rates when formulating and implementing policies that impact on the exchange rate.
Keywords
Modeliranje varijacija valutnih tečajeva; GARCH; EGARCH i APARCH modeli
Hrčak ID:
183491
URI
Publication date:
30.6.2017.
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