Foreign Exchange Market Volatility in Eu Accession Countries in the Run-Up to Euro Adoption: Weathering Uncharted Waters

January 1, 2004

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Format: Chicago

Istvan P Szekely, and Ádám Kóbor. Foreign Exchange Market Volatility in Eu Accession Countries in the Run-Up to Euro Adoption: Weathering Uncharted Waters, (USA: International Monetary Fund, 2004) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper analyzes foreign exchange market volatility in four Central European EU accession countries in 2001-2003. By using a Markov regime-switching model, it identifies two regimes representing high- and low-volatility periods. The estimation results show not only that volatilities are different between the two regimes but also that some of the cross-correlations differ. Notably, cross-correlations increase substantially for two pairs of currencies (the Hungarian forint-Polish zloty and the Czech koruna-Slovak koruna) in the high-volatility period. The paper concludes by discussing the policy implications of these findings.

Subject: Currencies, Currency markets, Exchange rate adjustments, Exchange rates, Financial markets, Foreign exchange, Foreign exchange intervention, Money

Keywords: Baltics, Currencies, Currency markets, EU accession countries, Exchange rate adjustments, Exchange rates, Foreign exchange intervention, Foreign exchange market volatility, Global, High-volatility regime, Markov regime-switching model, Model estimation result, Regime persistence, Regime-switching model, State, State probability estimate, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/016
Stock No:

WPIEA0162004
ISBN:

9781451843439
ISSN:

1018-5941

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