Modelling exchange rate variations and global shocks in Brazil
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 ens...
| Main Authors: | , |
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| Format: | Article |
| Language: | deu |
| Published: |
Faculty of Economics University of Rijeka
2017-06-01
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| Series: | Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu |
| Subjects: | |
| Online Access: | https://www.efri.uniri.hr/sites/efri.uniri.hr/files/cr-collections/2/08-ngalawa-2017-1-1498741962.pdf |
| Summary: | 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. |
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| ISSN: | 1331-8004 1846-7520 |