Modeling Exchange Rate and Nigerian Deposit Money Market Dynamics Using Trivariate form of Multivariate GARCH Model
Deebom, Zorle Dum, Tuaneh, Godwin Lebari
Asian Journal of Economics, Business and Accounting · pp. 1–18 · Published 4 Mar 2019
10.9734/ajeba/2019/v10i230103Abstract
The risks associated with exchange rate and money market indicators have drawn the attentions of econometricians, researchers, statisticians, and even investors in deposit money banks in Nigeria. The study targeted at modeling exchange rate and Nigerian deposit banks money market dynamics using trivariate form of multivariate GARCH model. Data for the period spanning from 1991 to 2017 on exchange rate (Naira/Dollar) and money market indicators (Maximum and prime lending rate) were sourced for from the central bank of Nigeria (CBN) online statistical database. The study specifically investigated; the dynamics of the variance and covariance of volatility returns between exchange rate and money market indicators in Nigeria were examine whether there exist a linkage in terms of returns and volatility transmission between exchange rate and money market indicators in Nigeria and compared the difference in Multivariate BEKK GARCH considering restrictive indefinite under the assumption of normality and that of student’s –t error distribution. Preliminary time series checks were done on the data and the results revealed the present of volatility clustering. Results reveal the estimate of the maximum lag for exchange rate and money market indicators were 4 respectively. Also, the results confirmed that there were two co-integrating equations in the relationship between the returns on exchange rate and money market indicators. The results of the diagonal MGARCH –BEKK estimation confirmed that diagonal MGARCH –BEKK in students’-t was the best fitted and an appropriate model for modeling exchange rate and Nigerian deposit money market dynamics using trivariate form of multivariate GARCH model. Also, the study confirmed presence of two directional volatility spillovers between the two sets of variables.
Cited by 2
Ngozi V. Atoi, Chinedu G. Nwambeke · Central Bank of Nigeria Journal of Applied Statistics · 2021
Showing 1 of 2 known citations — external sources report more than can currently be individually listed.
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