News and correlations of CEEC-3 financial markets
David Büttner and
Bernd Hayo ()
Economic Modelling, 2010, vol. 27, issue 5, 915-922
We employ DCC-MGARCH models to investigate conditional correlations between six CEEC-3 financial markets. In general, the highest correlations exist between Hungary and Poland in foreign exchange and stock markets. Short-term money markets are somewhat isolated from each other. We find that the associations of CEEC-3 exchange rates versus euro are weaker than those versus the US dollar. The persistence of the effect of shocks on the time-varying correlations is strongest for foreign exchange and stock markets, indicating a tendency toward contagion. In searching for the origins of financial market volatility in the CEEC-3, we uncover some evidence of Granger-causality on the foreign exchange markets. Finally, using a pool model, we investigate the impact of euro area, US, and CEEC-3 news on the correlations. Apart from ECB monetary policy news, we observe no broad effects of international news on correlations; instead, local news exerts an influence, which suggests a dominance of country- or market-specific circumstances.
Keywords: Financial; markets; Czech; Republic; Hungary; Poland; Political; news; Macroeconomic; shocks; Contagion; DCC-MGARCH (search for similar items in EconPapers)
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Working Paper: News and Correlations of CEEC-3 Financial Markets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:5:p:915-922
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