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Convergence in exchange rates: market's view on CE-4 joining EMU

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  • Oxana Babetskaia-Kukharchuk
  • Ian Babetskii
  • Jiri Podpiera

Abstract

We empirically analyse currency fluctuations in four central European states (CE-4) against the USD and Euro, employing daily data over 1 January 1994 to 10 October 2005 and constructing a dynamic correlation coefficient based on the estimates of a bivariate generalized autoregressive conditional heteroscedasticity model. We find evidence of convergence in exchange rate volatilities between CE-4 currencies and the Euro. In other words, from the US market's point of view, currencies of the CE-4 region and the Euro tend to behave quite similarly. This degree of synchronicity is in line with the composition of currency baskets and the share of the Euro as a trade-invoicing currency in the CE-4 economies.

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  • Oxana Babetskaia-Kukharchuk & Ian Babetskii & Jiri Podpiera, 2008. "Convergence in exchange rates: market's view on CE-4 joining EMU," Applied Economics Letters, Taylor & Francis Journals, vol. 15(5), pages 385-390.
    • Handle: RePEc:taf:apeclt:v:15:y:2008:i:5:p:385-390
    DOI: 10.1080/13504850600705984
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    References listed on IDEAS

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    1. Linda S. Goldberg, 2005. "Trade Invoicing in the Accession Countries: Are They Suited to the Euro?," NBER Chapters, in: NBER International Seminar on Macroeconomics 2005, pages 357-393, National Bureau of Economic Research, Inc.
    2. Klaassen, F.J.G.M., 1999. "Have Exchange Rates Become More Closely Tied? Evidence from a New Multivariate GARCH Model," Other publications TiSEM af43cd1c-9656-4e45-bfd1-f, Tilburg University, School of Economics and Management.
    3. Calvet, Laurent E. & Fisher, Adlai J. & Thompson, Samuel B., 2006. "Volatility comovement: a multifrequency approach," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 179-215.
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    Cited by:

    1. Daniel Stavárek, 2009. "Assessment of the exchange rate convergence in Euro-candidate countries," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 11(25), pages 159-180, February.
    2. Jan Babecky & Sofia Bauducco & Ales Bulir & Martin Cihak & Petr Jakubik & Lubos Komarek & Zlata Komarkova & Jiri Podpiera & Christian Schmieder & Laurent Weill, 2009. "CNB Economic Research Bulletin: Financial and Global Stability Issues," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 7, number rb07/2 edited by Jan Babecky & Jan Frait, January.
    3. Filip Novotný, 2012. "The Link Between the Brent Crude Oil Price and the US Dollar Exchange Rate," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(2), pages 220-232.
    4. Gábor Dávid Kiss & Tamás Schuszter, 2015. "The Euro Crisis and Contagion among Central and Eastern European Currencies: Recommendations for Avoiding Lending in a Safe Haven Currency such as CHF," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(6), pages 678-698.
    5. David McMillan & Isabel Ruiz & Alan Speight, 2010. "Correlations and spillovers among three euro rates: evidence using realised variance," The European Journal of Finance, Taylor & Francis Journals, vol. 16(8), pages 753-767.
    6. Jan Babecky & Philip Du Caju & Kamil Dybczak & Kamil Galuscak & Mary Keeney & Theodora Kosma & Martina Lawless & Julian Messina & Daphne Nicolitsas & Tairi Room & Frank Smets & Pawel Strzelecki & Mati, 2010. "CNB Economic Research Bulletin: Wage Adjustment in Europe," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 8, number rb08/2 edited by Jan Babecky & Kamil Galuscak, January.
    7. Balázs Égert & Evžen Kočenda, 2011. "Time-varying synchronization of European stock markets," Empirical Economics, Springer, vol. 40(2), pages 393-407, April.
    8. Simona Moagăr-Poladian & Dorina Clichici & Cristian-Valeriu Stanciu, 2019. "The Comovement of Exchange Rates and Stock Markets in Central and Eastern Europe," Sustainability, MDPI, vol. 11(14), pages 1-22, July.
    9. Kiss, Gábor Dávid & Kosztopulosz, Andreász, 2012. "The impact of the crisis on the monetary autonomy of Central and Eastern European countries," Public Finance Quarterly, Corvinus University of Budapest, vol. 57(1), pages 28-52.
    10. Jaromir Baxa & Jiri Bohm & Roman Horvath & Lubos Komarek & Petr Kral & Magdalena Morgese Borys & Filip Rozsypal & Branislav Saxa & Borek Vasicek, 2011. "Monetary Policy Analysis in a Central Bank," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 9, number rb09/1 edited by Jan Babecky & Roman Horvath, January.
    11. repec:prg:jnlpep:v:preprint:id:530:p:1-15 is not listed on IDEAS

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