Measuring the news impact on EUR/ALL exchange rate volatility using TGARCH model

Gentjan ÇERA, Eda DOKLE & Edmond ÇERA

Abstract Since early 90s, Albania has adopted the flexible exchange rate regime. A vast empirical literature on exchange rate is focused on modeling its volatility. In contrast, this paper provides empirical analysis regarding the news impact on the EUR/ALL exchange rate volatility, using TGARCH model. We argue that the series has three important features of assets’ return proposed by the theory: unpredictability, fat tails and volatility clustering. The results show the existence and importance of news impact on exchange rate return.
Key words Albanian lek, EUR/ALL, news impact, TGARCH
JEL classification F31, C58