The aim of this paper is to provide evidence about the existence or non-existence of structural breaks in exchange rates of European transition economies. We used the testing procedure of Vogelsang (1997) that allows for detecting a break at an unknown date in the trend function of a dynamic univariate time series. The procedure does not impose restrictions on the nature of data since it allows trending and unit-root regressors. The results depend in a striking way on the economic climate of a particular country. In Balkan countries, which belong to less stable economies, the measures adopted by monetary authorities indeed brought about a structural break in exchange rate behavior. In more stable transition economies, such as those in Central Europe, the monetary steps tended to stabilize the exchange rate behavior. Finally, the exchange rates of the Baltic countries offer mixed results.
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Paper provided by Commission of the EEC - Ecofin, Country Studies in its series Papers with number
149.
Length: 28 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:eeccou:149
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Find related papers by JEL classification: C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing F31 - International Economics - - International Finance - - - Foreign Exchange P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
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