Exchange Rate Volatility in the Context of Domestic and Global Uncertainty: A GARCH-MIDAS Approach

The GARCH-MIDAS model was utilized to evaluate the components of economic policy uncertainty (EPU) that exert the greatest influence on exchange rate volatility. The findings indicate that both global EPU and its domestic counterpart (NEPU) contribute to exchange rate fluctuations; however, NEPU demonstrates a significantly stronger effect than GEPU. Additionally, the analysis identifies NEPU as a more effective predictor of exchange rate volatility relative to GEPU.