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On Asymmetry of Exchange Rate Volatility in New EU Member and Candidate Countries

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  • Stavarek, Daniel

Abstract

In this paper, we examine the exchange rate volatility in selected new EU Member States (Czech Republic, Hungary, Poland, Slovakia) and candidate countries (Croatia, Romania, Turkey) using TARCH model and daily data from the period May 2004 – December 2006. Besides the volatility estimation, the paper analyzes the asymmetric effects. The results suggest that some symptoms of asymmetry were found in all exchange rates except for CZK/EUR. However, the most distinct effects are evident in Slovakia and Turkey where the appreciation of the national currency and the appreciation-side deviation from the target exchange rate contribute significantly to the increase in the exchange rate volatility.

Suggested Citation

  • Stavarek, Daniel, 2007. "On Asymmetry of Exchange Rate Volatility in New EU Member and Candidate Countries," MPRA Paper 7298, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7298
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    File URL: https://mpra.ub.uni-muenchen.de/7298/1/MPRA_paper_7298.pdf
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    References listed on IDEAS

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    1. Kocenda, Evzen & Valachy, Juraj, 2006. "Exchange rate volatility and regime change: A Visegrad comparison," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 727-753, December.
    2. Jarko Fidrmuc & Roman Horváth, 2006. "Credibility of Exchange Rate Policies in Selected EU New Members: Evidence from High Frequency Data," Working Papers IES 2006/28, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2006.
    3. Zakoian, Jean-Michel, 1994. "Threshold heteroskedastic models," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 931-955, September.
    4. Ito, Takatoshi & Yabu, Tomoyoshi, 2007. "What prompts Japan to intervene in the Forex market? A new approach to a reaction function," Journal of International Money and Finance, Elsevier, vol. 26(2), pages 193-212, March.
    5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    6. Tarlok Singh, 2002. "On the GARCH estimates of exchange rate volatility in India," Applied Economics Letters, Taylor & Francis Journals, vol. 9(6), pages 391-395.
    7. Chmelarova, Viera & Schnabl, Gunther, 2006. "Exchange rate stabilization in developed and underdeveloped capital markets," Working Paper Series 636, European Central Bank.
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    1. repec:khe:scajes:v:3:y:2017:i:3:p:47-53 is not listed on IDEAS

    More about this item

    Keywords

    asymmetry; European Union; exchange rate volatility; TARCH models;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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