Publication detail

Credibility of Exchange Rate Policies in Selected EU New Members: Evidence from High Frequency Data

Author(s): prof. Roman Horváth Ph.D., Jarko Fidrmuc
Type: IES Working Papers
Year: 2006
Number: 28
ISSN / ISBN:
Published in: IES Working Paper 2006/28
Publishing place: Prague
Keywords: Exchange rates, target zones, ERM II, inflation targeting, GARCH
JEL codes: F31, C22, C23
Suggested Citation: Fidrmuc, J., R., Horváth (2006). “ Credibility of Exchange Rate Policies in Selected EU New Members: Evidence from High Frequency Data ” IES Working Paper 28/2006, IES FSV. Charles University
Grants: GACR 402/05/H510 Ekonomická teorie politických trhů
Abstract: We examine the daily exchange rate dynamics in selected EU new member states (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 substantially deviated from the implicit target rates for all countries. Finally, we find significant asymmetric effects of the volatility of exchange rates in all new member states.
Downloadable: 2006_28_Horvath

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