Exchange rate modelling in the development community using the ARDL cointegration approach: The case of emerging markets

Risk Governance & Control: Financial Markets & Institutions

article

Abdulkader Aljandali¹  Christos Kallandranis² 

[1] Faculty of Business and Law, School of Economics, Finance and Law, Anglia Ruskin University;Department of Accounting, Finance and Economics, Regent’s University London

关键词: African Economies;    Exchange Rates;    Regional Integration;    Cointegration;   

DOI  :  10.22495/rgcv10i2p5

学科分类：社会科学、人文和艺术（综合）

来源: Virtus Interpress

【 摘 要 】

Despite rising interest in African economies, there is little prior research on the determinants of exchange rate movements in the region. This paper examines the monthly exchange rates of the country members of the Southern African Development Community (SADC) from 1990 to 2010 inclusive. Long-run equilibrium exchange rate models are established, exchange rate determinants are identified, and ex-post forecasts are generated for a period of 18 months (Sekantsi, 2011). The autoregressive distributed lag (ARDL) cointegration model is used in this paper, given its statistical advantages over commonly, applied cointegration techniques. Findings show that the ARDL method generates accurate forecasts for eight out of 11 sampled exchange rates. In keeping with earlier literature (e.g., Redda & Muzindusti, 2017; Zerihun & Breitenbach, 2017; etc.), findings suggest that the chances of SADC member countries fulfilling the requirements of a currency union are quite low. This paper marks one of the first attempts in the literature to forecast exchange rates in SADC using the ARDL approach (Pesaran & Shin, 1995). The results would be of interest to policy-makers, researchers and investors.

【 授权许可】

CC BY-NC