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Modeling Exchange Rate Volatility
Author(s) -
Balg Basher A.,
Metcalf Hugh
Publication year - 2010
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2009.00872.x
Subject(s) - economics , cointegration , volatility (finance) , econometrics , volatility swap , forward volatility , exchange rate , implied volatility , volatility smile , monetary economics
This paper investigates the impact of the volatility of the underlying macroeconomic fundamentals on exchange rate volatility utilizing the bounds testing approach to cointegration. The results show that, in the long run the volatility of the money supply is the sole determinant, whereas in the short run overshooting is found.