Economics at your fingertips  

Dynamic interactions between Central European currencies and the euro

Michael Gorman, Lucjan Orlowski () and Matthew H. Roessler

Economic Systems, 2020, vol. 44, issue 3

Abstract: We argue that the non-euro EU currencies of Central European countries have moved increasingly together with the euro in foreign exchange markets. To prove this point, we examine the dynamics of cross-elasticity between selected Central European currencies (the Czech koruna, Polish zloty, and Hungarian forint) and the euro exchange rates in U.S. dollar terms using daily data for the January 4, 2000 to April 5, 2019 sample period. We adopt the cross-elasticity model originally proposed and tested for the EU currencies by Orlowski (2016). To test the currency co-movements over time, we employ the Bai-Perron multiple breakpoint regression and two-state Markov switching tests. We find evidence of increasing co-movements between the Central European currencies and the euro that become particularly pronounced in times of financial distress. Co-movements of local exchange rates with the euro are also more pronounced during the euro-periphery sovereign debt crisis.

Keywords: Cross-elasticity of exchange rates; Central European currencies; Bai-Perron multiple breakpoint regression; Markov switching tests (search for similar items in EconPapers)
JEL-codes: E42 F15 F31 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.ecosys.2020.100781

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Nithya Sathishkumar ().

Page updated 2021-03-28
Handle: RePEc:eee:ecosys:v:44:y:2020:i:3:s0939362520300881