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: |
Web page: http://vyzc.pef.mendelu.cz/en
More information through EDIRC
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.:
- Guillermo A. Calvo & Carmen M. Reinhart, 2002.
"Fear Of Floating,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(2), pages 379-408, May.
- 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.
- Yang, Lijian, 2006. "A semiparametric GARCH model for foreign exchange volatility," Journal of Econometrics, Elsevier, vol. 130(2), pages 365-384, February.
- 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.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Chmelarova, Viera & Schnabl, Gunther, 2006. "Exchange rate stabilization in developed and underdeveloped capital markets," Working Paper Series 0636, European Central Bank.
- Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
- 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.
- Michael Melvin & Mark P. Taylor, 2009.
"The Crisis in the Foreign Exchange Market,"
CESifo Working Paper Series
2707, CESifo Group Munich.
- 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.
- 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.
- Krugman, Paul R, 1991.
"Target Zones and Exchange Rate Dynamics,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(3), pages 669-82, August.
- Marion Kohler, 2010. "Exchange rates during financial crises," BIS Quarterly Review, Bank for International Settlements, March.
- 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.
- 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.
- 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.
- Fratzscher, Marcel, 2009. "What explains global exchange rate movements during the financial crisis?," Working Paper Series 1060, European Central Bank.
- Roman Horvath, 2007. "Ready for Euro? Evidence on EU new member states," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1083-1086.
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.