The Volatility of Exchange Rate Using GARCH Type Models with Normal Distribution: Evidence from Pakistan

This paper approaches GARCH type models for exchange rate volatility modeling over the period of 1st January 2005 to 31st December 2018 with daily data of exchange rate from Pakistan against US dollar. Volatility clustering and leverage effect are more stylized facts of exchange rate which captures by applying the symmetric and asymmetric models. Based on the GARCH family model, the results are shown the significance of exchange rate under GARCH model and extensions of GARCH family such as PGARCH, TGARCH, CGARCH and ACGARCH. Except of PGARCH and TGARCH, the summation of ARCH and GARCH value is more than one. Exceeding value of estimated persistent coefficient from one is indicating an explosive mean reverting process. Negative significance of EGARCH's leverage value is guaranteed the existence of negative shocks effect on exchange rate volatility.