European Currency Volatility after Economic and Monetary Union

35 Pages Posted: 18 Jun 2003

See all articles by Richard Heaney

Richard Heaney

Australian National University

John Swieringa

Australian National University (ANU)

Date Written: January 13, 2003

Abstract

Corporate and institutional foreign exchange market participants are sensitive to the effects of volatility on their day-to-day trading activities and so an important question is whether the introduction of the euro had an impact on foreign exchange rate volatility. Rather than compare individual currencies with the Euro we compare the pre 1999 volatility of three synthetic euro exchange rate series with the volatility of the actual euro starting from the 1st of January 1999. Volatility tests are undertaken within a GARCH framework. There is evidence of a statistically significant increase in transatlantic exchange rate volatility following the introduction of the euro. Acknowledgements: We would like to express our thanks to the staff in the School of Finance and Applied Statistics at the ANU, particularly Dr Chris Bilson for his support and guidance.

Keywords: Economic and Monetary Union, euro, foreign exchange volatility, GARCH

JEL Classification: C22, F15, F31, G15

Suggested Citation

Heaney, Richard and Swieringa, John, European Currency Volatility after Economic and Monetary Union (January 13, 2003). EFMA 2003 Helsinki Meetings. Available at SSRN: https://ssrn.com/abstract=407710 or http://dx.doi.org/10.2139/ssrn.407710

Richard Heaney (Contact Author)

Australian National University ( email )

Canberra, Australian Capital Territory 0200
Australia
(+61) 6 2494726 (Phone)
(+61) 6 2495005 (Fax)

John Swieringa

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory
Australia

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