Browsing by Author "Abreu, Marvin Kyle M."
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Item Restricted Are exchange rates more volatile with greater uncertainty? Evidence from the php/usd exchange rate using GARCH-MIDAS models(2021-01-21) Abreu, Marvin Kyle M.; Epetia, Ma. Christina F.This study explores the relationship between policy-related economic uncertainty and the volatility of the PHP/USD exchange rate returns. The study uses data constructed from Google Trends to measure uncertainty and employs GARCH-MIDAS models to differentiate the short- run and long-run components of exchange rate volatility. The results reveal that more policy-related economic uncertainty leads to decreased volatility in the long run, with uncertainty in the US having a greater effect than uncertainty in the Philippines. The counter intuitive outcomes may spring from the fact that uncertainty relates to the search for more information, which may exhibit a long-memory process where economic agents form beliefs that lead them to risk aversion. This study also separates market-related uncertainty from policy-related uncertainty using a regression method, where results show that market-related uncertainty does not significantly affect exchange rate volatility in the long run.