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Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets

Author

Listed:
  • Todea, Alexandru

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, M. Kogălniceanu, no. 1)

  • Platon, Diana

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, M. Kogălniceanu, no. 1)

Abstract
This article investigates sudden changes in volatility of four Central and Eastern European foreign exchange markets using the Iterated Cumulative Sums of Squares (ICSS) algorithm and re-examines the volatility persistence during the period 1999 to 2009. We determined that the identification of sudden changes is associated with local financial, economic and political events, with the exception of the financial crisis as a global factor. The accession to the EU reflects a positive stabilizing effect. Accounting for these sudden shifts in volatility in the GARCH models significantly reduces the persistence of volatility or long memory in the Central and Eastern Europe foreign exchange markets.

Suggested Citation

  • Todea, Alexandru & Platon, Diana, 2012. "Sudden Changes In Volatility In Central And Eastern Europe Foreign Exchange Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 38-51, June.
    • Handle: RePEc:rjr:romjef:v::y:2012:i:2:p:38-51
    as

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    File URL: http://www.ipe.ro/rjef/rjef2_12/rjef2_2012p38-51.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    currency markets; volatility persistence; GARCH models; shifts in volatility; economic and political events;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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