Exchange Rate Regimes and Volatility: Comparison of the Snake and Visegrad

Juraj Valachy and Evžen Ko?enda ()
Authors registered in the RePEc Author Service: Evžen Kočenda

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: Exchange rate stability was defined as one of the prerequisites for monetary integration in Europe. In this paper, we analyze recent developments in the volatility of exchange rates of the Central European countries (the Visegrad Group) and a selected group of European Union countries (the Snake) participating in the former European Monetary System. We compare volatilities in the currencies of both groups under specific exchange rate regimes using two different approaches to modeling exchange rate volatility: squared returns parametric model and GARCH. Both methods provide identical results for the currencies of the Visegrad group: an increase in volatility after a floating exchange rate regime was introduced. The case of the Snake countries exhibits mixed results for two currencies and a concurring result for the others: a decrease in volatility. In one case we are left with an insignificant coefficient. We consider the results as robust and suitable for policy making decisions.

Keywords: exchange rate regime; volatility; transition; integration; Central Europe; European Union; nonlinearity; interest rate parity (search for similar items in EconPapers)
JEL-codes: C14 C22 C51 E43 F31 F33 F36 P59 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2003-10-01
New Economics Papers: this item is included in nep-ifn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Exchange rate volatility and regime change: A Visegrad comparison (2006)
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