Academic Editor: Youssef EL FOUTAYENI
Received |
Accepted |
Published |
04 January 2020 |
19 January 2020 |
10 March 2020 |
Abstract: The purpose of this article is to investigate the impact of a flexible exchange rate on volatility interdependence with the world’s major currency pair EUR/USD. To do so, we use daily exchange rates from Morocco and Kuwait over large periods that we split into specific periods to capture the different change occurring in the exchange rate regime. We then use multivariate GARCH models to investigate the evolution of the interdependence. The main result is that introducing greater flexibility tend to reduce the interdependence and increase the impacts of past shocks. We also find that the composition of the peg basket and international crisis impacts the interdependence highly. Finally, we present some important policy implications as well as some propositions for follow up studies.
