This study empirically investigates the nature of exchange rate
volatility in the context of West Africa. The study uses daily data on the
exchange rates of the West African CFA franc (XOF) in terms of US Dollar. The
empirical analysis has been carried out for the period from 13-11-2009 to
18-09-2023, for a total of 5058 observations. We excluded the last 25% of observations
in order to evaluate the forecasting accuracy. The exchange rate volatility of
the West African CFA franc against the US Dollar is estimated using GARCH
models based on normal and studentís t-distribution of innovations. Results
show that the ARMA(3,1)-GARCH(1,2) model with student-t distribution is well
adequate model to capture the mean and the volatility process of USD-CFA
exchange rate log returns.
Keywords: Exchange rates,
normal and student-t distribution, ARMA-GARCH.