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Volatility Regimes in Central and Eastern European Countries' Exchange Rates

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  • Frömmel, Michael

Abstract

We investigate the exchange rate volatility of six Central and Eastern European countries (CEEC) between 1994 and 2004. The analysis merges two approaches, the GARCH-model (Bollerslev 1986) and the Markov Switching Model (Hamilton 1989). We discover switches between high and low volatility regimes which are consistent with policy settings for Hungary, Poland and, less pronounced, the Czech Republic, whereas Romania and Slovakia do not show a clear picture. Slovenia, finally, shows some kind of anticipation of the wide fluctuation margins in ERM2.

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Bibliographic Info

Paper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover with number dp-333.

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Length: 33 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:han:dpaper:dp-333

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Keywords: CEEC; exchange rate volatility; regime switching GARCH; Markov switching model; transition economies;

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Cited by:
  1. Todea, Alexandru & Platon, Diana, 2012. "Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 38-51, June.

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