Exchange Rate Volatility in the Balkans and Eastern Europe: Implications for International Investments

Alexandra Horobet (), Lucian Belascu () and Ana-Maria Barsan ()
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Alexandra Horobet: Bucharest University of Economic Studies
Lucian Belascu: Lucian Blaga University of Sibiu
Ana-Maria Barsan: University of Bucharest

A chapter in The First Decade of Living with the Global Crisis, 2016, pp 137-164 from Springer

Abstract: Abstract Our paper’s objective is to study the volatility of exchange rates from the region that have not yet adopted the Euro and are not members of the Exchange Rate Mechanism II by considering the exchange rate regime and the implications of currency volatility for foreign capital flows. We model exchange rate volatility by using standard deviations of daily logarithmic changes in the exchange rates, rolling standard deviations, Hodrick-Prescott filters to detect the trends in volatility and ARIMA models. We find that currency volatility remains a strong issue for these countries and that central banks have attempted to manage it, particularly after the global financial crisis. Spikes in monthly volatility are identified for all currencies, although with some variation in time. Over the long-run, some exchange rates experienced sudden increases in volatility over the entire period, but rather quickly corrected, while others have shown an episode of high volatility at the beginning of the period and recorded a reasonable level of volatility throughout the remaining period. Exchange rate volatility “has memory”, but some exchange rates are more prone to the persistent effects of shocks in volatility.

Keywords: Exchange rates; Volatility; Eastern Europe; Balkans; F31; F37; G17 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-24267-5_11

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DOI: 10.1007/978-3-319-24267-5_11

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