Comparison Between Different Probability Distributions for Modeling Exchange Rate Volatility Behavior in Oil Countries for the Period 1990 – 2022
DOI:
https://doi.org/10.31185/wjps.887Keywords:
Normal Distribution , Fréchet Distribution ,Log Normal Distribution, Oil-Exporting Countries, Exchange Rate Volatility.Abstract
this study examines the distributional properties of exchange rate volatility for major oil-exporting developing economies from 1990-2022. Three probability distributions [ Normal, Fr'echet, and Log Normal] are compared using moment method and maximum likelihood approaches.The Bayesian information criterion (BIC) and the Akaike information criterion (AIC) are used to assess goodness-of-fit. The results indicate that the Normal distribution tends to provide the greatest fit for many countries [Iraq, Kuwait, Libya, Iran, Algeria, Oman, and Bahrain]. The Log Normal distribution is found to be optimal for[ Saudi Araia, Qatar, and Egypt] , while the Fr'echet distribution fits best only for United Arab Emirates. This analysis provides insights into the underlying distributional characteristics of exchange rate returns in these countries, which can inform appropriate model selection for volatility forecasting and risk management applications . The research adds to existing literature by conducting a entire distributional comparison across a broader set of oil- exporting developing economies over an extended time.
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