Macroeconomic Regimes and Foreign Exchange Rate Volatility in India

The IUP Journal of Applied Economics, Vol. XVI, No. 3, July 2017, pp. 25-46

Posted: 4 Aug 2018

See all articles by Trilochan Tripathy

Trilochan Tripathy

XLRI – Xavier School of Management

Luis A. Gil-Alana

University of Navarra - Department of Economics

Date Written: July 16, 2018

Abstract

This paper analyzes the asymmetric volatility of foreign exchange rates with respect to the Indian rupee by identifying associated macroeconomic regimes in India. The paper aims to analyze the volatility spillovers and other relationships of the Indian rupee (INR) with respect to the US dollar (USD), Canadian dollar (CAD), British pound (GBP), Swiss franc (CHF) Japanese yen (YEN) and the euro (EUR) for the period 1973-2012. The study makes use of GARCH family models. The results show that the daily exchange rates of all the currencies considered exhibit volatility persistence and conditional autocorrelation. It is also found that the impact of exchange rate innovations on the conditional variance of the foreign exchange return series varies across the macroeconomic regimes.

Suggested Citation

Tripathy, Trilochan and Gil-Alana, Luis A., Macroeconomic Regimes and Foreign Exchange Rate Volatility in India (July 16, 2018). The IUP Journal of Applied Economics, Vol. XVI, No. 3, July 2017, pp. 25-46, Available at SSRN: https://ssrn.com/abstract=3214395

Trilochan Tripathy (Contact Author)

XLRI – Xavier School of Management ( email )

Jamshedpur 831001, Jharkhand
India

Luis A. Gil-Alana

University of Navarra - Department of Economics ( email )

Campus de Arrosadia
Pamplona, 31006
Spain

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