Monetary information arrivals and intraday exchange rate volatility : a comparison of the GARCH and the EGARCH models

In this article, we examine the intradaily Euro-dollar exchange rate volatility persistence result from the dissymmetric impact of monetary policy signals stemming from the ECB Council and the FOMC. A model is constructed by extending the AR(1)-GARCH (1,1) to an exponential process EGARCH (1,1), using high-frequency data (five minutes frequency) which integrates a polynomials structure depending on signal variables, starting from the deseasonalized exchange rate returns series. It is found that, unlike the equity market, the best volatility predictions are derived from the EGARCH(1,1) process.