Convergence in exchange rates: market's view on CE-4 joining EMU
- 25 March 2008
- journal article
- research article
- Published by Informa UK Limited in Applied Economics Letters
- Vol. 15 (5), 385-390
- https://doi.org/10.1080/13504850600705984
Abstract
We empirically analyse currency fluctuations in four central European states (CE-4) against the USD and Euro, employing daily data over 1 January 1994 to 10 October 2005 and constructing a dynamic correlation coefficient based on the estimates of a bivariate generalized autoregressive conditional heteroscedasticity model. We find evidence of convergence in exchange rate volatilities between CE-4 currencies and the Euro. In other words, from the US market's point of view, currencies of the CE-4 region and the Euro tend to behave quite similarly. This degree of synchronicity is in line with the composition of currency baskets and the share of the Euro as a trade-invoicing currency in the CE-4 economies.Keywords
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