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Altered bank and exchange volatility

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  • Evžen Kočenda

Abstract

This paper examines the behaviour of the Czech crown's exchange rate when pegged to a currency basket. The peg is supposed to limit the overall instability of the currency. The GARCH(1,1) model with a dummy variable for the volatility response is used to account for a change in the width of the fluctuation band. The results of this paper show that volatility of the exchange rate decreased after a much wider fluctuation band was introduced to limit movements of the currency basket index.

Suggested Citation

  • Evžen Kočenda, 1998. "Altered bank and exchange volatility," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 173-181, May.
    • Handle: RePEc:bla:etrans:v:6:y:1998:i:1:p:173-181
    DOI: 10.1111/j.1468-0351.1998.tb00043.x
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    Cited by:

    1. Buch, Claudia M. & Heinrich, Ralph P. & Pierdzioch, Christian, 1998. "Taxing short-term capital flows - An option for transition economies?," Kiel Discussion Papers 321, Kiel Institute for the World Economy (IfW Kiel).

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