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Sociopolitical instability, volatility, and the bid-ask spread: Evidence from the free market for dollars in Poland

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  • Ali Kutan
  • Su Zhou

Abstract

This paper provides empirical evidence that the weekly bid-ask spread in the Polish free foreign exchange market is heavily affected by the intensity of sociopolitical unrest in this country. A GARCH model is estimated to study the volatility of the free market for dollars in Poland from the third week of October 1988 to the fourth week of January 1990. This period is interesting and important because it includes social and political events under two different government regimes. Empirical evidence suggests that significant sociopolitical turmoil appears to increase the volatility of the market and consequently create substantial changes in the spread. The results of this paper may represent valuable information for other reforming countries. Copyright Kluwer Academic Publishers 1995

Suggested Citation

  • Ali Kutan & Su Zhou, 1995. "Sociopolitical instability, volatility, and the bid-ask spread: Evidence from the free market for dollars in Poland," Open Economies Review, Springer, vol. 6(3), pages 225-236, July.
    • Handle: RePEc:kap:openec:v:6:y:1995:i:3:p:225-236
    DOI: 10.1007/BF01000082
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    References listed on IDEAS

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    Cited by:

    1. Brada, Josef C. & Kutan, Ali M. & Yigit, Taner M., 2004. "The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans," ZEI Working Papers B 33-2004, University of Bonn, ZEI - Center for European Integration Studies.
    2. Taoufik Bouraoui & Helmi Hammami, 2017. "Does political instability affect exchange rates in Arab Spring countries?," Applied Economics, Taylor & Francis Journals, vol. 49(55), pages 5627-5637, November.

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