Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets

Alexandru Todea () and Diana Platon ()
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Diana Platon: Faculty of Economics and Business Administration, Babeş-Bolyai University, M. Kogălniceanu, no. 1

Journal for Economic Forecasting, 2012, issue 2, 38-51

Abstract: This article investigates sudden changes in volatility of four Central and Eastern European foreign exchange markets using the Iterated Cumulative Sums of Squares (ICSS) algorithm and re-examines the volatility persistence during the period 1999 to 2009. We determined that the identification of sudden changes is associated with local financial, economic and political events, with the exception of the financial crisis as a global factor. The accession to the EU reflects a positive stabilizing effect. Accounting for these sudden shifts in volatility in the GARCH models significantly reduces the persistence of volatility or long memory in the Central and Eastern Europe foreign exchange markets.

Keywords: currency markets; volatility persistence; GARCH models; shifts in volatility; economic and political events (search for similar items in EconPapers)
JEL-codes: C12 C58 G15 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2012:i:2:p:38-51

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