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Volatility Regimes in Central and Eastern European Countries’ Exchange Rates

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  • M. FRÖMMEL

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Abstract

The choice of an exchange rate arrangement affects exchange rate volatility: higher flexibility goes ahead with increasing volatility and vice versa (Flood and Rose 1995, 1999). We investigate five Central and Eastern European countries 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 consistent with policy settings for Hungary, Poland and, less pronounced, the Czech Republic, whereas Romania and Slovakia do not show a clear picture.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 07/487.

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Length: 37 pages
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:rug:rugwps:07/487

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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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