What DCC-GARCH model tell us about the effect of the gold price's volatility on south african exchange rate?

Kebalo, Leleng (2014): What DCC-GARCH model tell us about the effect of the gold price's volatility on south african exchange rate?

Abstract

The aim of this paper is to study through a model rarely used and little known, the influence of the gold price's volatility on the south african real exchange rate. More precisely, it is to show that through the Dynamic Conditional Correlation GARCH model; model used in our paper, we get results that are consistent with economic works on the relationship between gold price's volatility and the real exchange rate. The period retained in this research paper going from May 1995 to April 2014. After analysis, we find that in the short term, the real exchange rate is more sensitive to its own volatility shocks, compared to the effect of the volatility shock of gold price. The last shock, although high, is less persistent on the real exchange rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: Volatility, exchange rate, gold price, DCC-GARCH model
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables; F - International Economics > F3 - International Finance; G - Financial Economics > G1 - General Financial Markets

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