Revue d'économie et de statistique appliquée
Volume 22, Numéro 1, Pages 8-30
2025-06-03
Modelling And Forecasting The Volatility Of The Informal Exchange Rate In Algeria (2014-2024) Using Garch Models
Authors : Oulddali Oussama . Benabdallah Soumeya .
Abstract
This research examines the volatility of the Algerian informal exchange rate by employing the GARCH model. The rationale behind choosing the GARCH model is based on empirical characteristics of the data like volatility clustering, non-normality, and large ARCH effects. Employing a blend of descriptive statistics, stationarity and diagnosis tests, the research confirm that exchange rate returns exhibit time-varying volatility—typical of financial time series for emerging economies. The results validate a high persistence of volatility that validates the long-term effect of shocks. A 10-day in-sample informal exchange rate prediction validates the model's predictability according to MAE and RMSE results. These results validate the relevance of the model to capture magnitude and structure of informal market movements.
Keywords
Informal exchange rate ; Stationarity ; Volatility Clustering ; Heteroscedasticity ; GARCH model
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