Impact of COVID-19 on Exchange rate volatility of Bangladesh: Evidence through GARCH model

TL;DR

This paper investigates how COVID-19 case increases have significantly affected the volatility of Bangladeshi Taka exchange rates against USD, JPY, and SEK using a GARCH (1,1) model.

Contribution

It applies the GARCH (1,1) model to quantify COVID-19's impact on exchange rate volatility in Bangladesh, providing new empirical evidence.

Findings

COVID-19 cases significantly increase exchange rate volatility.

Volatility impact is positive across USD, JPY, and SEK.

The model confirms the pandemic's influence on financial stability.

Abstract

This study uses the GARCH (1,1) model to examine the impact of COVID-19 cases (log value) on the volatility of the Exchange rate return of Bangladeshi taka (BDT) over the US dollar (USD), Japanese Yen (JPY), and Swedish Krona (SEK). The result shows that an increase in the number of COVID-19-affected cases in Bangladesh has a significant and positive impact on the volatility of exchange rates BDT/USD, BDT/JPY, and BDT/SEK.