Altered bank and exchange volatility

Evžen Kočenda

The Economics of Transition, 1998, vol. 6, issue 1, 173-181

Abstract: This paper examines the behaviour of the Czech crown's exchange rate when pegged to a currency basket. The peg is supposed to limit the overall instability of the currency. The GARCH(1,1) model with a dummy variable for the volatility response is used to account for a change in the width of the fluctuation band. The results of this paper show that volatility of the exchange rate decreased after a much wider fluctuation band was introduced to limit movements of the currency basket index.

Date: 1998
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https://doi.org/10.1111/j.1468-0351.1998.tb00043.x

Related works:
Working Paper: The Czech Crown's Volatility Under Modified Exchange Regimes (1997)
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