Foreign Exchange Market Volatility in Eu Accession Countries in the Run-Up to Euro Adoption
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 InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 04/16.
Date of creation: 01 Jan 2004
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-23 (All new papers)
- NEP-CBA-2005-11-14 (Central Banking)
- NEP-FIN-2005-10-22 (Finance)
- NEP-FMK-2005-10-25 (Financial Markets)
- NEP-IFN-2005-10-26 (International Finance)
- NEP-TRA-2005-10-24 (Transition Economics)
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