Volatility Regimes in Central and Eastern European Countries’ Exchange Rates

Michael Frömmel

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: The choice of an exchange rate arrangement affects exchange rate volatility: higher flexibility goes ahead with increasing volatility and vice versa (Flood and Rose 1995, 1999). We investigate five Central and Eastern European countries between 1994 and 2004. The analysis merges two approaches, the GARCH-model (Bollerslev 1986) and the Markov Switching- Model (Hamilton 1989). We discover switches between high and low volatility regimes consistent with policy settings for Hungary, Poland and, less pronounced, the Czech Republic, whereas Romania and Slovakia do not show a clear picture.

Keywords: CEEC; exchange rate volatility; regime switching GARCH; Markov switching model; transition economies (search for similar items in EconPapers)
JEL-codes: E42 F31 F36 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-10
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fmk, nep-ifn, nep-mac and nep-tra
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http://wps-feb.ugent.be/Papers/wp_07_487.pdf (application/pdf)

Related works:
Journal Article: Volatility Regimes in Central and Eastern European Countries’ Exchange Rates (2010)
Working Paper: Volatility Regimes in Central and Eastern European Countries' Exchange Rates (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:07/487

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