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Samson » August 20th, 2022

The Arab Monetary Fund Issues A Study Entitled “Analysis Of Symmetric And Asymmetric Information In The Structure Of Fluctuation In Real Exchange Rates”

20th August, 2022

The results of the symmetry analysis showed that symmetric information has an equivalent effect on the returns on real exchange rates in most Arab countries.

The results of the information asymmetry study showed that positive news has statistically significant effects on exchange rate returns compared to negative news.

The study provides basic information for policy makers to take decisions that contribute to strengthening the exchange markets in the Arab countries.

Understanding the structure of fluctuations in foreign exchange rates is fundamental to assessing the risk of investing in the exchange rate (forex) market. Therefore, the study aims to analyze the symmetric and asymmetric information in the structure of exchange rate fluctuations in the Arab countries.

The study applied the (EGARCH) model to analyze the volatility structure of the selected currencies using the daily data of the rate of return on real exchange rates during the period from January 3, 2017 to June 2, 2022, including the Saudi riyal, the Kuwaiti dinar, the Bahraini dinar, the Egyptian pound, the Algerian dinar, the Tunisian dinar, the Moroccan dirham.

The results of the analysis of symmetric information indicate that the returns of the real exchange rate markets under study are affected by the information of a symmetric nature, and that the memory of exchange rate fluctuations is more affected by the previous information, and it persists for some time, except for the Kuwaiti exchange rate which shows better stability. 

On the other hand, the results of the analysis of asymmetric information indicate that real exchange rate returns in Saudi Arabia, Egypt and Algeria are significantly affected by information of asymmetric nature, and that exchange rate returns are significantly affected by positive news more than negative news. 

However, neither positive nor negative information or news had any statistically significant effect on the returns of the real exchange rate markets in Kuwait, Bahrain, Tunisia and Morocco. Also, the exchange rate markets of Kuwait, Bahrain, Tunisia and Morocco are not subject to the effects of asymmetric information.

The results of the study provide important information for policy makers and investors in the exchange rate (forex) markets in the Arab region to take decisions that enhance the stability of the exchange markets in the Arab countries.  LINK

The full version of the study is available at the link

Source: Dinar Recaps

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