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Volatility of a Seemingly Fixed Exchange Rate

Author

Listed:
  • Evžen Kočenda

Abstract

A conditional variance analysis is applied to study the exchange rate of the Czech crown. The crown is pegged to a currency basket with an imposed narrow band. The central bank’s consistent policy enables the semi-fixed exchange rates to behave similarly to free ones. Their movements exhibit strong nonlinear dependency which is accounted for by an employment of the GARCH(1,1) model with daily dummies. The nonparametric BDS test proclaims accuracy of the model that filtered out nonlinearity and captured a forecastable structure present in the data.
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Suggested Citation

  • Evžen Kočenda, 1996. "Volatility of a Seemingly Fixed Exchange Rate," Eastern European Economics, Taylor & Francis Journals, vol. 34(6), pages 37-67, December.
    • Handle: RePEc:mes:eaeuec:v:34:y:1996:i:6:p:37-67
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    Cited by:

    1. Evzen Kocenda, 2001. "An Alternative To The Bds Test: Integration Across The Correlation Integral," Econometric Reviews, Taylor & Francis Journals, vol. 20(3), pages 337-351.
    2. Kocenda, Evzen, 1998. "Exchange rate in transition," MPRA Paper 32030, University Library of Munich, Germany.
    3. Piotr Fiszeder & Witold Orzeszko, 2012. "Nonparametric Verification of GARCH-Class Models for Selected Polish Exchange Rates and Stock Indices," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(5), pages 430-449, November.
    4. Evzen Kocenda & Lubos Briatka, 2005. "Optimal Range for the iid Test Based on Integration Across the Correlation Integral," Econometric Reviews, Taylor & Francis Journals, vol. 24(3), pages 265-296.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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