Foreign exchange market volatility in EU accession countries in the run-up to Euro adoption: weathering uncharted waters
AbstractThe paper analyzes foreign exchange market volatility in four Central European EU accession countries in 2001-2003. By using a Markov regime-switching model, it identifies two regimes representing high- and low-volatility periods. The estimation results show not only that volatilities are different between the two regimes but also that some of the cross-correlations differ. Notably, cross-correlations increase substantially for two pairs of currencies (the Hungarian forint-Polish zloty and the Czech koruna-Slovak koruna) in the high-volatility period. The paper concludes by discussing the policy implications of these findings.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Systems.
Volume (Year): 28 (2004)
Issue (Month): 4 (December)
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Other versions of this item:
- IstvÃ¡n P. SzÃ©kely & ÃdÃ¡m KÃ³bor, 2004. "Foreign Exchange Market Volatility in EU Accession Countries in the Run-up to Euro Adoption: Weathering Uncharted Waters," IMF Working Papers 04/16, International Monetary Fund.
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