Estimating the empirical distributions of exchange rates volatility in Sri Lanka

Abstract

The exchange rate is the worth of a country’s currency compared to another foreign currency. It is important to identify the empirical distribution of the exchange rates, as these rates are indicators of the economy of a country. This study aims to identify the accurate distributions of eight exchange rates (i.e. USD, EURO, GBP, CHF, CAD, AUD, SGD and JPY) against the Sri Lankan Rupees among potential distributions. This is the first study that identifies the empirical distributions of exchange rates in Sri Lanka. According to the findings of previous studies, most of the exchange rates are non-normal due to their volatile behavior. With respect to the statistical properties of the data, all considered exchange rates in this study were skewed and the kurtosis values indicated severe non-normality.