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

20 Pages Posted: 15 Feb 2006

See all articles by Adam Kobor

Adam Kobor

New York University (NYU)

István P. Székely

European Commission, DGECFIN; Corvinus University of Budapest

Date Written: January 2004

Abstract

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 forintPolish zloty and the Czech korunaSlovak koruna) in the high-volatility period. The paper concludes by discussing the policy implications of these findings.

Keywords: Markov regime-switching model, foreign exchange market volatility, EU accession countries

JEL Classification: C10, G10

Suggested Citation

Kóbor, Ádám and Szekely, Istvan P., Foreign Exchange Market Volatility in EU Accession Countries in the Run-Up to Euro Adoption: Weathering Uncharted Waters (January 2004). IMF Working Paper, Vol. , pp. 1-20, 2004. Available at SSRN: https://ssrn.com/abstract=878839

Ádám Kóbor (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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Istvan P. Szekely

European Commission, DGECFIN ( email )

CHAR 15/216
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Belgium
+3222958674 (Phone)

Corvinus University of Budapest ( email )

Budapest
Hungary

HOME PAGE: http://www.uni-corvinus.hu/index.php?id=22061

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