Journal of Applied Finance & Banking

Co-variation of exchange rates in the ecowas zone: A verification based on dynamic conditional correlations

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• Abstract 

  The purpose of this study is to determine the synchronous or asynchronous nature of movements in the exchange rate yields of the various ECOWAS currencies. This analysis uses the dynamic conditional correlation model recently developed by [1]. The use of this methodology is mainly due to the non-constancy of the volatility of the financial series. Moreover, this characteristic of volatility remains natural for a small, very open economy, which is also subject to a multiplicity of exogenous shocks. The results indicate a transmission of the volatility of the main currencies, namely CEDI, NAIRA and FRANC CFA. Such results argue in favour of the creation of a monetary zone.

  JEL classification numbers: C10; C 32; F31.
  Keywords: Exchange Rate, Volatility Garch, Dynamic Conditional Correlation, West African Monetary Zone