Exchange Rate Volatility, Global Financial Crisis and the Day-of-the-Week Effect

  • Rufus Ayodeji Olowe University of Lagos
Keywords: Day of the week effect, volatility, Exchange Rate, Financial Reforms, Global Financial crisis, Volatility persistence, GARCH

Abstract

This paper investigated the day-of-the-week effect in the Nigerian foreign exchange market using the GARCH (1, 1) and GJR-GARCH (1, 1) models in the light of banking reforms and the global financial crisis. Using data over the period, January 2, 2002 and March 13, 2009, we examined the persistence in volatility for the Nigerian foreign exchange market. Although the results failed to support the presence the day-of-the week effect in the FOREX rate returns, there was evidence of this effect on the volatility of the returns. Additionally, available evidence indicated persistence in volatility of the Nigerian foreign exchange market returns. The results further showed that the banking reform in July 2004, insurance reform and global financial crisis have no impact on exchange rate return but had impact on exchange rate volatility. Among the models considered, the GARCH (1, 1) model fitted the data best.

Key words: day-of-the-week effect, volatility, exchange rate, generalized autoregressive conditional heteroscedasticity models

Author Biography

Rufus Ayodeji Olowe, University of Lagos
Published
2011-11-02
Section
Articles and Research papers