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Interest-rate volatility and volatility spillovers in emerging Europe

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  • Scott W. Hegerty

Abstract

While many transition economies -- particularly those that hope to join the Euro -- have seen their economies converge to Europe’s, this process is by no means complete. Considerable macroeconomic volatility persists. This study examines the variability of the short-term nominal interest rates of ten transition economies, finding that eight of them exhibit time-varying volatility that can be modeled as a GARCH or Exponential GARCH process. Incorporating various measures of external volatility into the models, we find that those economies with fixed or managed exchange rates tend to experience more volatility spillovers, particularly from the Eurozone, regardless of the degree of transition. Only Estonia has a fixed exchange rate and remains free of international contagion.

Suggested Citation

  • Scott W. Hegerty, 2011. "Interest-rate volatility and volatility spillovers in emerging Europe," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(5), pages 599-614, October.
  • Handle: RePEc:taf:irapec:v:25:y:2011:i:5:p:599-614
    DOI: 10.1080/02692171.2011.557049
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    File URL: http://hdl.handle.net/10.1080/02692171.2011.557049
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    1. Jürgen von Hagen & Iulia Siedschlag, 2010. "Managing Capital Flows: Experiences from Central and Eastern Europe," Chapters,in: Managing Capital Flows, chapter 7 Edward Elgar Publishing.
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    Cited by:

    1. Scott W. Hegerty, 2015. "Interest-Rate Volatility in the Baltics: Issues of Measurement and International Contagion," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(1), pages 12-27.
    2. repec:bla:afrdev:v:29:y:2017:i:2:p:211-222 is not listed on IDEAS

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