Detalle Publicación

Geopolitical risks and historical exchange rate volatility of the BRICS

Título de la revista: INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN: 1059-0560
Volumen: 77
Páginas: 179 - 190
Fecha de publicación: 2022
Resumen:
The predictability of geopolitical risks (GPR) for exchange rate volatility of the BRICS is examined using both historical and recent GPR data. Relying on the GARCH-MIDAS-X model based on available data frequencies, we find that the BRICS exchange rates are more vulnerable to recent GPR data than the historical data. Additional analysis suggests contrasting evidence between the recent global GPR data and the country-specific GPR data implying that the BRICS exchange rates are more vulnerable to global than domestic GPR. Finally, we document some out-of-sample economic gains of accounting for GPR in the valuation of foreign exchange portfolio.
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