European exchange rates volatility and its asymmetrical components during the financial crisis
Two forms of asymmetry in the exchange rate volatility are examined in this paper. We analyze four currencies of new EU member states, two currencies of non euro area old EU members, US dollar and Swiss franc against the euro during the period financial crisis. We apply a modified TARCH model on data grouped into four phases of the financial crises differing in intensity and market sentiment. The results suggest that the exchange rates usually shared a similar trend in volatility. The presence of asymmetric attributes of the exchange rate volatility was relatively common. Similar symptoms of asymmetry were registered mainly in the new EU member states and Sweden. Appreciation movements seem to have significantly different effects on volatility than the depreciation movements of equal size (first form of asymmetry) particularly during the phases of crisis initialization and culmination. By contrast, a significant impact of divergence from the target exchange rate on the volatility (second form of asymmetry) was revealed principally during the crisis stabilization.
|Date of creation:||Nov 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Zemědělská 1, Brno|
Web page: http://vyzc.pef.mendelu.cz/en
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wang, Jianxin & Yang, Minxian, 2009. "Asymmetric volatility in the foreign exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(4), pages 597-615, October.
- Fidrmuc, Jarko & Horváth, Roman, 2008.
"Volatility of exchange rates in selected new EU members: Evidence from daily data,"
Elsevier, vol. 32(1), pages 103-118, March.
- Jarko Fidrmuc & Roman Horváth, 2007. "Volatility of Exchange Rates in Selected New EU Members: Evidence from Daily Data," CESifo Working Paper Series 2107, CESifo Group Munich.
- Marion Kohler, 2010. "Exchange rates during financial crises," BIS Quarterly Review, Bank for International Settlements, March.
- Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
- Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
- Melvin, Michael & Taylor, Mark P., 2009.
"The crisis in the foreign exchange market,"
Journal of International Money and Finance,
Elsevier, vol. 28(8), pages 1317-1330, December.
- Michael McKenzie & Heather Mitchell, 2002. "Generalized asymmetric power ARCH modelling of exchange rate volatility," Applied Financial Economics, Taylor & Francis Journals, vol. 12(8), pages 555-564.
- Roman Horvath, 2007. "Ready for Euro? Evidence on EU new member states," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1083-1086.
- Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993.
"On the relation between the expected value and the volatility of the nominal excess return on stocks,"
157, Federal Reserve Bank of Minneapolis.
- Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. " On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Fratzscher, Marcel, 2009.
"What explains global exchange rate movements during the financial crisis?,"
Working Paper Series
1060, European Central Bank.
- Fratzscher, Marcel, 2009. "What explains global exchange rate movements during the financial crisis?," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1390-1407, December.
- Michel Beine & Jérôme Lahaye & Sébastien Laurent & Christopher Neely & Franz Palm, 2007.
"Central Bank intervention and exchange rate volatility: its continuous and jump components,"
ULB Institutional Repository
2013/10413, ULB -- Universite Libre de Bruxelles.
- Michel Beine & Jér�me Lahaye & Sébastien Laurent & Christopher J. Neely & Franz C. Palm, 2007. "Central bank intervention and exchange rate volatility, its continuous and jump components," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 201-223.
- Michel Beine & Jérôme Lahaye & Sébastien Laurent & Christopher J. Neely & Franz C. Palm, 2007. "Central bank intervention and exchange rate volatility, its continuous and jump components," Working Papers 2006-031, Federal Reserve Bank of St. Louis.
- Chmelarova, Viera & Schnabl, Gunther, 2006. "Exchange rate stabilization in developed and underdeveloped capital markets," Working Paper Series 0636, European Central Bank.
- Yang, Lijian, 2006. "A semiparametric GARCH model for foreign exchange volatility," Journal of Econometrics, Elsevier, vol. 130(2), pages 365-384, February.
- Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 669-682.
- Galati, Gabriele & Melick, William & Micu, Marian, 2005. "Foreign exchange market intervention and expectations: The yen/dollar exchange rate," Journal of International Money and Finance, Elsevier, vol. 24(6), pages 982-1011, October.
- Daniel Stavárek, 2010. "Exchange rate volatility and the asymmetric fluctuation band on the way to the Eurozone," Applied Economics Letters, Taylor & Francis Journals, vol. 17(1), pages 81-86, January.
When requesting a correction, please mention this item's handle: RePEc:men:wpaper:17_2011. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luděk Kouba)
If references are entirely missing, you can add them using this form.