IDEAS home Printed from https://ideas.repec.org/a/taf/irapec/v25y2011i5p599-614.html
   My bibliography  Save this article

Interest-rate volatility and volatility spillovers in emerging Europe

Author

Listed:
  • Scott W. Hegerty

Abstract

While many transition economies -- particularly those that hope to join the Euro -- have seen their economies converge to Europe’s, this process is by no means complete. Considerable macroeconomic volatility persists. This study examines the variability of the short-term nominal interest rates of ten transition economies, finding that eight of them exhibit time-varying volatility that can be modeled as a GARCH or Exponential GARCH process. Incorporating various measures of external volatility into the models, we find that those economies with fixed or managed exchange rates tend to experience more volatility spillovers, particularly from the Eurozone, regardless of the degree of transition. Only Estonia has a fixed exchange rate and remains free of international contagion.

Suggested Citation

  • Scott W. Hegerty, 2011. "Interest-rate volatility and volatility spillovers in emerging Europe," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(5), pages 599-614, October.
    • Handle: RePEc:taf:irapec:v:25:y:2011:i:5:p:599-614
    DOI: 10.1080/02692171.2011.557049
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/02692171.2011.557049
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/02692171.2011.557049?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jürgen von Hagen & Iulia Siedschlag, 2010. "Managing Capital Flows: Experiences from Central and Eastern Europe," Chapters, in: Masahiro Kawai & Mario B. Lamberte (ed.), Managing Capital Flows, chapter 7, Edward Elgar Publishing.
    2. Nikiforos Laopodis, 2000. "Monetary policy implications of volatility linkages among long-term interest rates," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(2), pages 160-177, June.
    3. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    4. Fung, Hung-Gay & Jang, Hoyoon & Lee, Wai, 1997. "International interest rate transmission and volatility spillover," International Review of Economics & Finance, Elsevier, vol. 6(1), pages 67-75.
    5. Christine Sauer & Alok K. Bohara, 2001. "Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 133-152, February.
    6. Laopodis, Nikiforos T, 2002. "Volatility Linkages among Interest Rates: Implications for Global Monetary Policy," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(3), pages 215-233, July.
    7. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    8. Stephanos Papadamou, 2009. "Yield spreads and real economic activity in East European transition economies," Applied Economics Letters, Taylor & Francis Journals, vol. 16(5), pages 531-537.
    9. Taufiq Choudhry & Myles Wallace, 2008. "Interest rate convergence in the Baltic countries of Latvia, Lithuania and Estonia," Applied Economics Letters, Taylor & Francis Journals, vol. 15(14), pages 1079-1083.
    10. Hegerty, Scott W., 2009. "Capital inflows, exchange market pressure, and credit growth in four transition economies with fixed exchange rates," Economic Systems, Elsevier, vol. 33(2), pages 155-167, June.
    11. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    12. repec:bla:reviec:v:9:y:2001:i:1:p:133-52 is not listed on IDEAS
    13. Stephanos Papadamou & Georgios Oikonomou, 2007. "The Monetary Transmission Mechanism: Evidence from Eight Economies in Transition," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 559-576.
    14. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    15. repec:bla:etrans:v:9:y:2001:i:1:p:53-86 is not listed on IDEAS
    16. Sebastian Edwards & Raul Susmel, 2003. "Interest-Rate Volatility in Emerging Markets," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 328-348, May.
    17. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Scott W. Hegerty, 2014. "Interest-rate volatility and volatility transmission in nine Latin American countries," Applied Financial Economics, Taylor & Francis Journals, vol. 24(13), pages 927-937, July.
    2. Scott W. Hegerty, 2015. "Interest-Rate Volatility in the Baltics: Issues of Measurement and International Contagion," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(1), pages 12-27.
    3. Kazeem Bello Ajide & Oluwanbepelumi Esther Osode, 2017. "Does FDI Dampen or Magnify Output Growth Volatility in the ECOWAS Region?," African Development Review, African Development Bank, vol. 29(2), pages 211-222, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Scott W. Hegerty, 2014. "Interest-rate volatility and volatility transmission in nine Latin American countries," Applied Financial Economics, Taylor & Francis Journals, vol. 24(13), pages 927-937, July.
    2. Franses,Philip Hans & Dijk,Dick van & Opschoor,Anne, 2014. "Time Series Models for Business and Economic Forecasting," Cambridge Books, Cambridge University Press, number 9780521520911, November.
    3. Scott W. Hegerty, 2015. "Interest-Rate Volatility in the Baltics: Issues of Measurement and International Contagion," Eastern European Business and Economics Journal, Eastern European Business and Economics Studies Centre, vol. 1(1), pages 12-27.
    4. repec:wyi:journl:002087 is not listed on IDEAS
    5. Asai, Manabu & McAleer, Michael, 2015. "Leverage and feedback effects on multifactor Wishart stochastic volatility for option pricing," Journal of Econometrics, Elsevier, vol. 187(2), pages 436-446.
    6. Levent, Korap, 2009. "Enflasyon ve enflasyon belirsizliği ilişkisi için G7 ekonomileri üzerine bir inceleme [An investigation for the inflation and inflation uncertainty relationship upon the G7 economies]," MPRA Paper 19478, University Library of Munich, Germany.
    7. Pelletier, Denis, 2006. "Regime switching for dynamic correlations," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 445-473.
    8. Tuysuz, Sukriye, 2007. "The asymmetric impact of macroeconomic announcements on U.S. Government bond rate level and volatility," MPRA Paper 5381, University Library of Munich, Germany.
    9. Alizadeh, Amir H. & Tamvakis, Michael, 2016. "Market conditions, trader types and price–volume relation in energy futures markets," Energy Economics, Elsevier, vol. 56(C), pages 134-149.
    10. Angelidis, Timotheos & Benos, Alexandros & Degiannakis, Stavros, 2004. "The Use of GARCH Models in VaR Estimation," MPRA Paper 96332, University Library of Munich, Germany.
    11. Issler, João Victor, 1999. "Estimating and forecasting the volatility of Brazilian finance series using arch models (Preliminary Version)," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 347, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    12. Meddahi, N., 2001. "An Eigenfunction Approach for Volatility Modeling," Cahiers de recherche 2001-29, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    13. Carlos Capistrán & Manuel Ramos‐Francia, 2009. "Inflation Dynamics In Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 27(3), pages 349-362, July.
    14. Steeley, James M., 2006. "Volatility transmission between stock and bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(1), pages 71-86, February.
    15. Remes, Piia, 2013. "Putting a Price on Carbon – Econometric Essays on the European Union Emissions Trading Scheme and its Impacts," Research Reports 62, VATT Institute for Economic Research.
    16. Francisco Blasques & Paolo Gorgi & Siem Jan Koopman & Olivier Wintenberger, 2016. "Feasible Invertibility Conditions and Maximum Likelihood Estimation for Observation-Driven Models," Tinbergen Institute Discussion Papers 16-082/III, Tinbergen Institute.
    17. Meddahi, Nour & Renault, Eric, 2004. "Temporal aggregation of volatility models," Journal of Econometrics, Elsevier, vol. 119(2), pages 355-379, April.
    18. Glosten, Lawrence R & Jagannathan, Ravi & Runkle, David E, 1993. "On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks," Journal of Finance, American Finance Association, vol. 48(5), pages 1779-1801, December.
    19. Chkili, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong, 2014. "Volatility forecasting and risk management for commodity markets in the presence of asymmetry and long memory," Energy Economics, Elsevier, vol. 41(C), pages 1-18.
    20. Andersen, Torben G & Sorensen, Bent E, 1996. "GMM Estimation of a Stochastic Volatility Model: A Monte Carlo Study," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 328-352, July.
    21. Subrata ROY, 2021. "Volatility Forecasting, Market Efficiency and Effect of Recession of SRI Indices," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(627), S), pages 259-284, Summer.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:25:y:2011:i:5:p:599-614. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIRA20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.