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Common Volatility Trends in the Central and Eastern European Currencies and the Euro

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  • Marcus Pramor
  • Natalia T. Tamirisa

Abstract

How much convergence has been achieved between Central and Eastern European (CEE) economies and the eurozone? We explore this question by comparing long-run volatility trends in CEE currencies and the euro. We find that these trends are closely correlated, pointing to convergence in the economic and financial structures of these economies. Nonetheless, the degree of commonality remains weaker than what had been found for major European currencies before the introduction of the euro. Spillovers of volatility across regional markets appear to have diminished over time, with the exception of the Hungarian forint, which remains a source of volatility shocks to regional currencies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/206.

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Length: 31
Date of creation: 01 Sep 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/206

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Related research

Keywords: Eastern Europe; Exchange rates; exchange rate; currency markets; correlations; equation; exchange rate volatility; correlation; statistics; predictability; foreign exchange; dollar exchange rates; foreign exchange market; econometrics; correlation analyses; heteroscedasticity; standard deviation; daily exchange rates; number of parameters; survey; currency areas; random walk; equations; covariances; bilateral exchange rate; exchange rate regime; operations research; forecasting; time series; dummy variable; standard deviations; flexible exchange rate; exchange rate depreciations; exchange rate uncertainty; nominal exchange rate; standard errors; outlier; maximum likelihood method; prediction; statistical measure; maximum likelihood estimation; autocorrelation; sampling; exchange rate stability; nominal exchange rates; exchange rate data; exchange rate variability; currency appreciation; currency depreciation; hypothesis testing; dynamic models;

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References

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Citations

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Cited by:
  1. Li, Dandan & Ghoshray, A. & Morley, B., 2011. "Uncovered Interest Parity and the Risk Premium," Department of Economics Working Papers, University of Bath, Department of Economics 24072, University of Bath, Department of Economics.
  2. Mikael Bask & Jarko Fidrmuc, 2009. "Fundamentals and Technical Trading: Behavior of Exchange Rates in the CEECs," Open Economies Review, Springer, Springer, vol. 20(5), pages 589-605, November.
  3. Bednarik, Radek, 2008. "Analýza volatility devizových kurzů vybraných ekonomik
    [The Analysis of Volatility of Selected Countries' Exchange Rates]
    ," MPRA Paper 15046, University Library of Munich, Germany.
  4. Morar Triandafil, Cristina & Brezeanu, Petre & Huidumac, Catalin & Morar Triandafil, Adrian, 2011. "The Drivers of the CEE Exchange Rate Volatility - Empirical Perspective in the context of the Recent Financial Crisis," Journal for Economic Forecasting, Institute for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 212-229, March.

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