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Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets

  • Todea, Alexandru

    ()

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, M. Kogălniceanu, no. 1)

  • Platon, Diana

    ()

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, M. Kogălniceanu, no. 1)

This article investigates sudden changes in volatility of four Central and Eastern European foreign exchange markets using the Iterated Cumulative Sums of Squares (ICSS) algorithm and re-examines the volatility persistence during the period 1999 to 2009. We determined that the identification of sudden changes is associated with local financial, economic and political events, with the exception of the financial crisis as a global factor. The accession to the EU reflects a positive stabilizing effect. Accounting for these sudden shifts in volatility in the GARCH models significantly reduces the persistence of volatility or long memory in the Central and Eastern Europe foreign exchange markets.

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Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2012)
Issue (Month): 2 (June)
Pages: 38-51

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Handle: RePEc:rjr:romjef:v::y:2012:i:2:p:38-51
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  1. Malik, Farooq, 2003. "Sudden changes in variance and volatility persistence in foreign exchange markets," Journal of Multinational Financial Management, Elsevier, vol. 13(3), pages 217-230, July.
  2. repec:ebl:ecbull:v:6:y:2008:i:10:p:1-10 is not listed on IDEAS
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  9. Bollerslev, Tim & Ole Mikkelsen, Hans, 1996. "Modeling and pricing long memory in stock market volatility," Journal of Econometrics, Elsevier, vol. 73(1), pages 151-184, July.
  10. Aggarwal, Reena & Inclan, Carla & Leal, Ricardo, 1999. "Volatility in Emerging Stock Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 34(01), pages 33-55, March.
  11. Cheong, Chin Wen, 2008. "Time-varying volatility in Malaysian stock exchange: An empirical study using multiple-volatility-shift fractionally integrated model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(4), pages 889-898.
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