 Conditional variance and fluctuation bandPrague Economic Papers, 1997, vol. 1997, issue 4 Abstract: The exchange rate of the Czech koruna pegged to a currency basket is analyzed. The change of value of the basket is measured by its index. The central point of the analysis is how the change in the fluctuation band of the index affected volatility of the exchange rate. By allowing for a wider fluctuation band, the CNB let the exchange rate fluctuate more freely, thus reducing its potential nominal stability. Because of the fact that the currency basket was introduced to keep a relatively stable nominal exchange rate and to limit its volatility, a further implication is that allowing for a wider fluctuation band should lead to more pronounced movements and increased volatility of the koruna. The results of the analysis clearly indicate that allowing for a wider fluctuation band resulted in a decrease in volatility of the key currencies (DEM and USD). The other two currencies (CHF and FRF) exhibit different behavior that suggests increased volatility after the narrow fluctuation band was abolished. Date: 1997 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:prg:jnlpep:v:1997:y:1997:i:4:id:140 Ordering information: This journal article can be ordered from DOI: 10.18267/j.pep.140 Access Statistics for this article Prague Economic Papers is currently edited by Klára Pavlová More articles in Prague Economic Papers from Prague University of Economics and Business Contact information at EDIRC. |
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