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Some stylised facts about the exchange rate behaviour of Central European currencies

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  • Jan Vejmělek

Abstract

The paper investigates developments of exchange rate time series of Central European currencies and tries to find evidence of some stylised facts. Statistical methods and an econometric approach to the univariate time series modelling of high-frequency data, i.e., daily, are used. The main conclusions are as follows: (1) All the CE nominal exchange time series are not stationary: nevertheless, stationarity of all the return time series was confirmed. (2) Volatility clustering was proven and the GARCH modelling approach was successfully applied, including asymmetric modelling of volatility. (3) The more flexible an exchange rate regime is, the more volatile the respective currency. This is true for both nominal and real exchange rates. While nominal volatility is lower than real volatility in a system of fixed or less flexible exchange rates, the opposite is true for flexible systems: exchange rate volatility is higher in nominal terms than in real terms.

Suggested Citation

  • Jan Vejmělek, 2016. "Some stylised facts about the exchange rate behaviour of Central European currencies," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2016(2), pages 3-17.
    • Handle: RePEc:prg:jnlaop:v:2016:y:2016:i:2:id:525:p:3-17
    DOI: 10.18267/j.aop.525
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    References listed on IDEAS

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    1. Kocenda, Evzen & Valachy, Juraj, 2006. "Exchange rate volatility and regime change: A Visegrad comparison," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 727-753, December.
    2. Fidrmuc, Jarko & Horváth, Roman, 2008. "Volatility of exchange rates in selected new EU members: Evidence from daily data," Economic Systems, Elsevier, vol. 32(1), pages 103-118, March.
    3. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    4. Lothian, James R., 1998. "Some new stylized facts of floating exchange rates," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 29-39, February.
    5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    More about this item

    Keywords

    exchange rate; volatility; time series analysis; GARCH models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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