Volatility persistence in Naira exchange rates returns: A pre- and post-global financial crisis

Abstract

The global financial crisis of 2008 has led to upheavals in the structural pattern and volatility persistence of many
macroeconomic variables, particularly exchange rates of the Naira against other currencies around the world. This paper
therefore examined these financial time series properties, in high frequency Naira exchange rate series during pre-global
and post-global crisis periods. Long range dependence techniques and volatility modelling approaches were applied on
level series, absolute and squared log-returns of six daily Naira exchange rate series between 12 October, 2001 and 19
December, 2014. Significant persistence of volatility in both absolute and square returns of the exchange rates series was
observed, and there was the difference in the level of persistence between the two time series sub-samples, that is, the pre-
crisis period seemed to exhibit lower level of volatility than the post-global crisis period. Further investigation using
estimates of volatility modelling confirmed lower volatility persistence in the pre-crisis period, and possible asymmetry in
the entire time series sample. The higher persistence of volatility observed in Naira exchange rates during the post crisis
period was as a result of the residual impacts of the global crisis on the economy that we experienced till the end of the
sampled period.