| Abstrakt: |
We examine the daily exchange rate dynamics in selected CEECs (Czech Republic, Poland, Romania, and Slovakia) using GARCH and TARCH models between 1999 and 2004. We show that these countries tried to reduce volatility of the spot exchange rate despite their official policy of free floating and inflation targeting. However, we find that the low credibility of exchange rate policy implied higher volatility of exchange rates when it approached the edge of its implicit target band around the long-run equilibrium exchange rates in the Czech Republic and Poland. In turn, Slovakia has been more successful in reducing the volatility of exchange rates. Finally, we find significant asymmetric effects of the volatility of exchange rates in all CEECs. |
