Volatility of a Seemingly Fixed Exchange Rate

Evžen Kočenda

MPRA Paper from University Library of Munich, Germany

Abstract: A conditional variance analysis is applied to study the exchange rate of the Czech crown. The crown is pegged to a currency basket with an imposed narrow band. The central bank’s consistent policy enables the semi-fixed exchange rates to behave similarly to free ones. Their movements exhibit strong nonlinear dependency which is accounted for by an employment of the GARCH(1,1) model with daily dummies. The nonparametric BDS test proclaims accuracy of the model that filtered out nonlinearity and captured a forecastable structure present in the data.

Keywords: exchange rates; currency basket; nonlinearity; GARCH (search for similar items in EconPapers)
JEL-codes: C22 F31 G10 (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (2)

Published in Eastern European Economics 6.34(1996): pp. 37-67

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Related works:
Journal Article: Volatility of a Seemingly Fixed Exchange Rate (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:70506

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