Sterling Pound (Gbp) Exchange-Rate Volatility in the Brexit Context using the Egarch Model - A Comparison between the Effective Gbp Volatility and the Egarch Estimation for the Period June 2016 - September 2019 : EGARCH

I. Tache; F. Darie

doi:10.31926/but.es.2019.12.61.2.13

Authors

I. Tache Transilvania University of Brasov, Romania
F. Darie Transilvania University of Brasov, Romania

DOI:

https://doi.org/10.31926/but.es.2019.12.61.2.13

Keywords:

EGARCH, modelling and forecasting, volatility, exchange-rates

Abstract

This study investigates whether different specifications of univariate GARCH models can usefully forecast volatility in the foreign exchange market. The study uses only forecasts from an asymmetric GARCH model, namely Exponential GARCH (EGARCH) for GBP/USD exchange rate, and compares the estimates with the volatility for the period June 2016 to September 2019. The dataset is obtained from “Investing.com” and covers the period between June 2016 - and September 2019. The data encompasses the slump of the GBP to a 31-year low due to a major political crisis in the United Kingdom. Besides averting the decision-making factors about the worrying consequences of Brexit, this paper reaches the conclusion that the EGARCH model could be used to predict the volatility of the currencies in the future.