TITLE:
Financial Fragility and Exchange Rate Volatility in Haiti: Evidence from Structural Breaks and VECM Analysis
AUTHORS:
Rocheny Sifrain
KEYWORDS:
Exchange Rate Volatility, Financial Fragility, Haiti, Remittances, Inflation, Monetary Policy, Structural Breaks, VECM
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.15 No.1,
January
8,
2026
ABSTRACT: This study investigates the determinants and dynamics of exchange rate volatility in Haiti over the period 1996 to 2024, within the broader context of financial fragility in small open economies. Using annual macroeconomic data and a multi-stage econometric framework that combines Ordinary Least Squares (OLS), Bai-Perron structural break tests, and a Vector Error Correction Model (VECM), the paper examines how inflation, money supply growth, remittance inflows, GDP growth, and lagged volatility influence currency fluctuations. The Bai-Perron analysis identifies a major structural break in 2002, marking a shift between distinct volatility regimes shaped by institutional change and macroeconomic policy adjustment. The VECM results confirm a stable long-run cointegrating relationship among the variables, while short-run dynamics indicate that inflation, remittances, and past volatility exert significant effects on exchange rate movements. Using this integrated approach, the study highlights how structural fragility amplifies the impact of macroeconomic shocks on currency stability. The findings underscore the need for credible monetary policy, remittance integration strategies, and stronger institutional governance to mitigate exchange rate instability in Haiti and other fragile economies facing persistent external and domestic pressures.