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Dirty floating and monetary independence in Central and Eastern Europe - The role of structural breaks

Author

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  • Thomas Windberger
  • Jesus Crespo Cuaresma
  • Janette Walde

Abstract

Obtaining reliable estimates of the volatility of interest rates and exchange rates is a necessary condition to evaluate issues related to monetary independence and fear of floating. In this paper we use methods which explicitly account for structural breaks in the volatility dynamics in order to assess monetary independence in the Czech Republic, Hungary and Poland. Our results indicate that the explicit modelling of structural breaks in volatility estimates can lead to striking differences concerning the evidence of monetary independence in Central and Eastern Europe. The results based on volatility estimates which account for regime change tend to indicate that the Czech Republic, Hungary and Poland have had a significant degree of monetary independence in the last decade.

Suggested Citation

  • Thomas Windberger & Jesus Crespo Cuaresma & Janette Walde, 2012. "Dirty floating and monetary independence in Central and Eastern Europe - The role of structural breaks," Working Papers 2012-21, Faculty of Economics and Statistics, University of Innsbruck.
  • Handle: RePEc:inn:wpaper:2012-21
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    References listed on IDEAS

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    Cited by:

    1. Łukasz Goczek & Dagmara Mycielska, 2019. "Actual monetary policy independence in a small open economy: the Polish perspective," Empirical Economics, Springer, vol. 56(2), pages 499-522, February.
    2. Łukasz Goczek & Dagmara Mycielska, 2016. "Euro Dominance Hypothesis and Monetary Policy Independence the Czech Perspective," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(6), pages 655-670.
    3. Łukasz Goczek & Dagmara Mycielska, 2013. "Ready for euro? Empirical study of the actual monetary policy independence in Poland," Working Papers 2013-13, Faculty of Economic Sciences, University of Warsaw.
    4. Łukasz Goczek & Dagmara Mycielska, . "Euro Dominance Hypothesis and Monetary Policy Independence - the Czech Perspective," Prague Economic Papers, University of Economics, Prague, vol. 0, pages 1-16.

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    More about this item

    Keywords

    Fear of floating; monetary independence; structural break; change-point model;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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