Multivariate GARCH estimations of volatility spillover amongst oil prices, exchange rates and news-based uncertainty in the CEE - 3 countries
David Umoru
Department of Economics, Edo State University Uzairue, Iyamho, Nigeria.
https://orcid.org/0000-0002-1198-299X
Timothy Igbafe Aliu
Department of Economics, Edo State University Uzairue, Iyamho, Nigeria.
https://orcid.org/0000-0002-1198-299X
Shehu S. Umar
Department of Statistics, Auchi Polytechnic Auchi, Nigeria.
https://orcid.org/0009-0001-5615-9833
Beauty Igbinovia
Department of Economics, Edo State University Uzairue, Iyamho, Nigeria.
https://orcid.org/0009-0005-6820-1110
DOI: https://doi.org/10.20448/economy.v12i2.6840
Keywords: BEKK-GARCH model, CCC-GARCH model, CZK/EUR exchange rate, High-Income countries, HUF/EUR exchange rate, NEWS-based uncertainty, Oil price variation, PLN/EUR exchange rate, VEC-GARCH model, Volatility transmission.
Abstract
This study empirically examined the comparative difference in the outcomes of multivariate GARCH estimations in the volatility transmission amongst oil prices, new-based policy uncertainty and exchange rates of the CEE-3 countries. The methodological scope is restricted to BEKK-GARCH, Constant CCC-GARCH and VEC-GARCH. The results of this research indicate significant transfer of volatility from the HUF/EUR, PLN/EUR, and CZK/EUR exchange rates to the price of Brent oil. The BEKK-GARCH results uphold the co-volatility with relation to exchange rates and oil prices in the CEE-3 countries and this was found as highly reciprocating and interdependent. The research also established a reciprocating transmission of volatility between the fluctuating price of oil and news based economic policy uncertainties in Hungary and Czech. The CCC-GARCH model sufficiently estimated oil price volatility spillover on currency rate and its volatility spillover on oil price fluctuation in Czech while VEC-GARCH model estimations sufficiently estimated oil price volatility transmission to exchange rates. The Polish and Czech news-based policy uncertainties were significant in influencing the PLN/EUR and CZK/EUR exchange rates respectively. The BEKK-GARCH and VECH-GARCH model estimations are efficient and hence highly recommended for ascertaining the volatility transmission within the financial markets in the CEE-3 countries.