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Some Exchange Rates Are More Stable than Others: Short-Run Evidence from Transition Countries

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  • Ales Bulir

Abstract

The paper investigates empirically the endogenous liquidity nexus of exchange rate determination on a sample of four transition economies. We find evidence in favor of the hypothesis of a nonlinear error correction process vis-a-vis longer-term trend deviations. The results suggest that early and successful exchange-rate market and financial-account liberalization pays off in terms of depth of the market and, hence, faster adjustment of national currencies to short-term shocks to the exchange rate.

Suggested Citation

  • Ales Bulir, 2003. "Some Exchange Rates Are More Stable than Others: Short-Run Evidence from Transition Countries," Working Papers 2003/05, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2003/05
    as

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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/wp5-2003.pdf
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    References listed on IDEAS

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    4. Adam Geršl & Tomáš Holub, 2006. "Foreign Exchange Interventions Under Inflation Targeting: The Czech Experience," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 475-491, October.
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    6. Lucio Sarno, 2003. "Nonlinear Exchange Rate Models: A Selective Overview," Rivista di Politica Economica, SIPI Spa, vol. 93(4), pages 3-46, July-Augu.
    7. Philippe Bacchetta & Eric Van Wincoop, 2006. "Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?," American Economic Review, American Economic Association, vol. 96(3), pages 552-576, June.
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    12. Bofinger, Peter & Wollmershäuser, Timo, 2001. "Managed Floating: Understanding the New International Monetary Order," CEPR Discussion Papers 3064, C.E.P.R. Discussion Papers.
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    Citations

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    Cited by:

    1. Adam Geršl & Tomáš Holub, 2006. "Foreign Exchange Interventions Under Inflation Targeting: The Czech Experience," Contemporary Economic Policy, Western Economic Association International, vol. 24(4), pages 475-491, October.
    2. Sandrine Levasseur, 2004. "Why not euroisation?," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 121-156.
    3. repec:hal:spmain:info:hdl:2441/3361 is not listed on IDEAS
    4. Tomas Holub, 2005. "Forex interventions: the Czech experience," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 150-61, Bank for International Settlements.

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    More about this item

    Keywords

    Exchange rate; endogenous liquidity; error-correction mechanism; nonlinearity.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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