Conditional jump dynamics of the Brazilian exchange rate

Authors

  • Regis A. Ely Universidade Federal de Pelotas (UFPel)

Abstract

This paper studies the conditional jump dynamics of the exchange rate between Real and U.S Dollar since the introduction of the floating regime in Brazil. We use a constant conditional jump model and three different specifications of the ARJI-GARCH model of Chan and Maheu (2002) to model jump dynamics. The results suggest that (i) exchange rate variations can be successfully modeled by conditional jumps, which are time-varying and sensitive to past shocks, (ii) currency depreciation presents little evidence of asymmetry in relation to jumps, and (iii) the jump intensity is highly persistent and behaves like an autorregressive moving average model. Events such as the 2008 financial crisis and the recent intervention policy of the Central Bank in 2012 are discussed on the basis of the model.

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Author Biography

Regis A. Ely, Universidade Federal de Pelotas (UFPel)

I am a Professor of Economics in the Department of Economics at Federal University of Pelotas (UFPel) and Doctor of Economics from University of Brasília (UnB). My research expertise is primarily in the areas of time series econometrics, applied and theoretical finance and recursive macroeconomics.

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Published

2014-04-22

Issue

Vol. 13 No. 1 (2013)

Section

Artigos

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