European exchange rates volatility and its asymmetrical components during the financial crisis

Daniel Stavarek

No 2011-17, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: Two forms of asymmetry in the exchange rate volatility are examined in this paper. We analyze four currencies of new EU member states, two currencies of non euro area old EU members, US dollar and Swiss franc against the euro during the period financial crisis. We apply a modified TARCH model on data grouped into four phases of the financial crises differing in intensity and market sentiment. The results suggest that the exchange rates usually shared a similar trend in volatility. The presence of asymmetric attributes of the exchange rate volatility was relatively common. Similar symptoms of asymmetry were registered mainly in the new EU member states and Sweden. Appreciation movements seem to have significantly different effects on volatility than the depreciation movements of equal size (first form of asymmetry) particularly during the phases of crisis initialization and culmination. By contrast, a significant impact of divergence from the target exchange rate on the volatility (second form of asymmetry) was revealed principally during the crisis stabilization.

Keywords: exchange rate volatility; asymmetry; TARCH model; financial crisis (search for similar items in EconPapers)
JEL-codes: C58 F31 G01 (search for similar items in EconPapers)
Pages: 28
Date: 2011-11
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:men:wpaper:17_2011

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