Swedish krona-euro return volatility and non-traditional monetary policies

Cynthia Tori (crtori@valdosta.edu) and Scott Tori (stori@troy.edu)
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Cynthia Tori: Valdosta State University
Scott Tori: Troy University

Economics Bulletin, 2019, vol. 39, issue 3, 2162-2174

Abstract: Using the EGARCH and MGARCH approaches, this study explores the effects non-traditional monetary policies and regional currency exchange returns have on Swedish krona-euro exchange rate return volatility. Using data from 4 January 1999 through 30 September 2018, the study finds the mean equations exhibit market efficiencies while the variance equations exhibit significant GARCH effects, small asymmetric effects, and volatility clustering. The study concludes that the non-traditional monetary policies adopted by the Sveriges Riksbank successfully reduced Swedish krona-euro return volatility. The quantitative easing monetary policy reduced the influence and persistence the term structure interest rate differential had on Swedish krona-euro return volatility. The study also finds the negative nominal interest rate monetary policy reduced the influence and persistence the short-term interest rate differential had on Swedish krona-euro return volatility. The Swedish krona-Danish krone returns, and Swedish krona-Norwegian krone returns exhibited large conditional correlations or spillover effects that increased Swedish krona-euro return volatility.

Keywords: EGARCH; MGARCH; exchange rate return volatility; non-traditional monetary policy; quantitative easing; negative nominal interest rates (search for similar items in EconPapers)
JEL-codes: E5 F3 (search for similar items in EconPapers)
Date: 2019-09-30
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