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Assessment of the exchange rate convergence in Euro-candidate countries

Author

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  • Daniel Stavárek

    () (Silesian University in Opava School of Business Administration in Karviná Czech Republic)

Abstract

This paper assesses the exchange rate convergence in selected euro-candidate countries using an alternative approach to official exchange rate stability convergence criterion. We apply various versions of correlation analysis on daily returns and implied GARCH volatility of nominal exchange rates of the euro, Czech koruna, Hungarian forint, Polish zloty, Romanian leu, Slovak koruna and Croatian kuna vis-à-vis US dollar. The results suggest that none of the eurocandidates' currencies achieved a sufficient degree of convergence. If anything, a majority of the currencies analyzed in the paper experienced a departure from convergence during the recent period.

Suggested Citation

  • Daniel Stavárek, 2009. "Assessment of the exchange rate convergence in Euro-candidate countries," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 11(25), pages 159-180, February.
  • Handle: RePEc:aes:amfeco:v:11:y:2009:i:25:p:159-180
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    References listed on IDEAS

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    1. Zsolt Darvas & György Szapáry, 2008. "Euro Area Enlargement and Euro Adoption Strategies," European Economy - Economic Papers 2008 - 2015 304, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. André Van Poeck & Jacques Vanneste & Maret Veiner, 2007. "Exchange Rate Regimes and Exchange Market Pressure in the New EU Member States," Journal of Common Market Studies, Wiley Blackwell, vol. 45, pages 459-485, June.
    3. Fidrmuc, Jarko & Horváth, Roman, 2008. "Volatility of exchange rates in selected new EU members: Evidence from daily data," Economic Systems, Elsevier, vol. 32(1), pages 103-118, March.
    4. Zlatuše Komárková & Luboš Komárek, 2007. "Integrace devizových trhů vybraných nových členských zemí Evropské unie
      [Integration of the foreign exchange markets of the selected EU new member states]
      ," Politická ekonomie, University of Economics, Prague, vol. 2007(3).
    5. Nikkinen, Jussi & Sahlstrom, Petri & Vahamaa, Sami, 2006. "Implied volatility linkages among major European currencies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 87-103, April.
    6. Ignazio Angeloni & Michael Flad & Francesco Paolo Mongelli, 2007. "Monetary Integration of the New EU Member States: What Sets the Pace of Euro Adoption?," Journal of Common Market Studies, Wiley Blackwell, vol. 45, pages 367-409, June.
    7. Castrén, Olli & Mazzotta, Stefano, 2005. "Foreign exchange option and returns based correlation forecasts: evaluation and two applications," Working Paper Series 447, European Central Bank.
    8. Frommel, Michael & Schobert, Franziska, 2006. "Exchange rate regimes in Central and East European countries: Deeds vs. words," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 467-483, September.
    9. Oxana Babetskaia-Kukharchuk & Ian Babetskii & Jiri Podpiera, 2008. "Convergence in exchange rates: market's view on CE-4 joining EMU," Applied Economics Letters, Taylor & Francis Journals, vol. 15(5), pages 385-390.
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    Cited by:

    1. Gábor Dávid Kiss & Andreász Kosztopulosz, 2012. "The impact of the crisis on the monetary autonomy of Central and Eastern European countries," Public Finance Quarterly, State Audit Office of Hungary, vol. 57(1), pages 28-52.

    More about this item

    Keywords

    exchange rate; convergence; correlation; GARCH; euro-candidates;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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