Does Changes in Characteristics of a Fixed Exchange Rate Regime Impact Conditional Volatility? Evidence from the Case of Morocco

Anotace: This article aims to exhibit and study the impacts that changing characteristics of a fixed exchange rate regime has on conditional volatility. To do so, using the U.S. dollar dirham (USDMAD) daily closing rates over 23 years, we compare the GARCH model results of four segmented sub-periods to each other and then to the global period of the study to detect disparities. The main result is that changes in exchange rate regime characteristics do impact the conditional volatility. Therefore, we recommend that the study of conditional volatility should use periods with no changes in the characteristics of the exchange rate regime to avoid bias. Otherwise, the use of segmented sub-periods should be adopted to take account of these changes. Finally, we present some key results about the impacts of these changes in Morocco’s exchange rate regime on the conditional volatility.