Foreign Exchange Volatility and the Bubble Formation in Financial Markets: Evidence From The COVID-19 Pandemic

Creative Commons License

Ozdemir O.

Ekonomika, cilt.101, sa.1, ss.142-161, 2022 (Scopus) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 101 Sayı: 1
  • Basım Tarihi: 2022
  • Doi Numarası: 10.15388/ekon.2022.101.1.8
  • Dergi Adı: Ekonomika
  • Derginin Tarandığı İndeksler: Scopus, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, Central & Eastern European Academic Source (CEEAS), EconLit, Directory of Open Access Journals
  • Sayfa Sayıları: ss.142-161
  • Anahtar Kelimeler: Bubble Formation, COVID-19, Exchange Rate, Forex Market, Right-Tailed Unit Root Test
  • İstanbul Gelişim Üniversitesi Adresli: Evet

Özet

© 2022 Citizen Science: Theory and Practice. All rights reserved.This paper applies recursive right-tailed unit root tests to detect bubble activity for Turkish Lira against financially most-traded five currencies (i.e., the US Dollar (USD/TRY), the British pound (GBP/TRY), the Euro (EUR/TRY), the Chinese Yuan (CNY/TRY) and the Russian Ruble (RUB/TRY)) over January 2, 2015 to February 12, 2021. It can be identified from the Supremum Augmented Dickey-Fuller (SADF) and the Generalized Supremum Augmented Dickey-Fuller (GSADF) tests statistics that there is a high degree of evidence of bubble activity which characterizes all five exchange rates both in the full-sample period and in the sub-periods, including the pre-COVID-19 era (January 2, 2015 to November 15, 2019) and the COVID-19 era (November 18, 2019 to February 12, 2021). The empirical results also indicate that positive bubbles are common for each selected exchange rate and the multiple bubbles were intensified during the COVID-19 period, referring that forex markets became relatively more inefficient compared to the pre-COVID-19 period.