The Impact of COVID-19 on Exchange Rate Volatility: Evidence Through GARCH Model

15 Pages Posted: 28 May 2020

See all articles by Lamia Benzid

Lamia Benzid

University of Sousse - LAMIDED Laboratory

Kaouther Chebbi

King Faisal University (KFU)

Date Written: May 28, 2020

Abstract

This paper employs a GARCH (1,1) model to investigate the impact of COVID-19 cases and related deaths in the US exchange rate volatility. Results show that an increase of the number of cases and the deaths (both in logs) in the US has a positive impact on the USD/EUR, USD/Yuan and USD/LivreSterling. Moreover, this paper uses GARCH (1,1) model to forecast the daily volatility of three exchange rates series with respect to American dollar. These results are useful for anyone needing forecasts of exchange rate futures volatility.

Keywords: COVID-19, Exchange rate volatility, GARCH (1, 1), Forecasting

JEL Classification: C53, G13, G15, C22

Suggested Citation

Benzid, Lamia and Chebbi, Kaouther, The Impact of COVID-19 on Exchange Rate Volatility: Evidence Through GARCH Model (May 28, 2020). Available at SSRN: https://ssrn.com/abstract=3612141 or http://dx.doi.org/10.2139/ssrn.3612141

Lamia Benzid

University of Sousse - LAMIDED Laboratory ( email )

Tunisia

Kaouther Chebbi (Contact Author)

King Faisal University (KFU) ( email )

Al Ahsa Hofuf
Kingdom of Saudi Arabia
Hofuf, Al Ahsa 317982
Saudi Arabia

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