Volatility transmission in emerging European foreign exchange markets

Vit Bubak, Evžen Kočenda and Filip Zikes

Journal of Banking & Finance, 2011, vol. 35, issue 11, 2829-2841

Abstract: This paper studies the dynamics of volatility transmission between Central European (CE) currencies and the EUR/USD foreign exchange using model-free estimates of daily exchange rate volatility based on intraday data. We formulate a flexible yet parsimonious parametric model in which the daily realized volatility of a given exchange rate depends both on its own lags as well as on the lagged realized volatilities of the other exchange rates. We find evidence of statistically significant intra-regional volatility spillovers among the CE foreign exchange markets. With the exception of the Czech and, prior to the recent turbulent economic events, Polish currencies, we find no significant spillovers running from the EUR/USD to the CE foreign exchange markets. To measure the overall magnitude and evolution of volatility transmission over time, we construct a dynamic version of the Diebold-Yilmaz volatility spillover index and show that volatility spillovers tend to increase in periods characterized by market uncertainty.

Keywords: Foreign; exchange; markets; Volatility; Spillovers; Intraday; data; Nonlinear; dynamics; European; emerging; markets (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (144)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426611001178
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Volatility Transmission in Emerging European Foreign Exchange Markets (2011)
Working Paper: Volatility Transmission in Emerging European Foreign Exchange Markets (2010)
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: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:11:p:2829-2841

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().