This article identifies the best models for forecasting the volatility of daily exchange returns of developing countries. An emerging consensus in the recent literature focusing on industrialized countries has noted the superior performance of the Fractionally Integrated Generalized Autoregressive Conditionally Heteroscedastic (FIGARCH) model in the case of industrialized countries, a result that is reaffirmed here. However, we show that when dealing with developing countries' data the IGARCH model results in substantial gains in terms of the in-sample results and out-of-sample forecasting performance. (authors' abstract)

This paper examines return co-movements and volatility spillovers between major exchange rates before and after the introduction of euro. Dynamic correlations and VAR-based spillover index results suggest significant return co-movements and volatility spillovers, however, their extend is, on average, lower in the post-euro period. Co-movements and spillovers are positively associated with extreme episodes and US dollar appreciations. The euro (Deutsche mark) is the dominant net transmitter of volatility, while the British pound the dominant net receiver of volatility in both periods. Nevertheless, cross-market volatility spillovers are bidirectional, and the highest spillovers occur between European markets. (author's abstract)