Foreign Exchange Market Volatility in Eu Accession Countries in the Run-Up to Euro Adoption: Weathering Uncharted Waters
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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.
Series:
Working Paper No. 2004/016
Subject:
Currencies Currency markets Exchange rate adjustments Exchange rates Financial markets Foreign exchange Foreign exchange intervention Money
English
Publication Date:
January 1, 2004
ISBN/ISSN:
9781451843439/1018-5941
Stock No:
WPIEA0162004
Pages:
20
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