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Co-movements of non-Euro EU currencies with the Euro

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  • Orlowski, Lucjan T.

Abstract

This paper examines co-movements of non-euro EU Members' currencies and the euro during the 2000–2015 sample period. We propose a model of cross-elasticity of exchange rates and perform the Bai-Perron multiple break points, GARCH and BVAR estimations on the daily data series. The results show high positive cross-elasticity (co-movements) between the euro and the currencies of Denmark, Sweden, Poland, the Czech Republic and Hungary. For the Romanian lei, cross-elasticity with the euro is initially nonexistent but subsequently it is steadily increasing over the sample period. This implies a strong substitution between these currencies and the euro in foreign exchange markets. In contrast, cross-elasticity between the British pound and the euro is considerably lower. For all examined non-euro currencies substitution with the euro increases substantially during the 2008–2010 global financial crisis.

Suggested Citation

  • Orlowski, Lucjan T., 2016. "Co-movements of non-Euro EU currencies with the Euro," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 376-383.
    • Handle: RePEc:eee:reveco:v:45:y:2016:i:c:p:376-383
    DOI: 10.1016/j.iref.2016.07.001
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    Cited by:

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    8. Kočenda, Evžen & Moravcová, Michala, 2018. "Intraday effect of news on emerging European forex markets: An event study analysis," Economic Systems, Elsevier, vol. 42(4), pages 597-615.
    9. Orlowski, Lucjan T. & Soper, Carolyne, 2019. "Market risk and market-implied inflation expectations," International Review of Financial Analysis, Elsevier, vol. 66(C).
    10. Orlowski, Lucjan T., 2017. "Volatility of commodity futures prices and market-implied inflation expectations," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 51(C), pages 133-141.

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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