An Empirical Analysis of Forex Volatility and Spillover Mechanisms in India

Abstract

This research article explores the volatility and spillover mechanisms in the Indian forex market through an empirical analysis spanning from 2008 to 2023. The main focus is to assess how the foreign exchange rates behave, observe trends in currency pair valuations, and study the volatility transmission in the market. The study concentrates on four major currencies: EURO/INR, USD/INR, GBP/INR, and YEN/INR, with data sourced from the RBI website, the IMF, and various secondary materials such as books and articles. The study used appropriate methods and techniques developed by previous researchers and financial analysts to evaluate forex volatility. ADF, Phillip Perron tests, ARMA, ARCH and GARCH models were used to analyse the forex volatility.