n African Finance Journal - Modelling exchange rate volatility in Zambia
|Article Title||Modelling exchange rate volatility in Zambia|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Affiliations||1 Bank of Zambia|
|Publication Date||Jan 2012|
|Pages||85 - 106|
|Keyword(s)||C22, Exchange Rate Volatility, F31, GARCH and PCA|
The eight real kwacha bilateral exchange rates examined over the period 1968-2008 in a GARCH framework are characterised by different conditional volatility dynamics. Evidence of asymmetric response to shocks suggests asymmetric central bank reaction to variations in volatility in exchange rates. An index of exchange rate volatility capturing influences specific to Zambia is constructed from the estimated conditional variance using principal components analysis for use as an alternative measure of exchange rate risk.
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