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Title: |
Time-Varying Behavior and Asymmetry in EMS Exchange Rates |
| Author: |
Laopodis,
Nikiforos T. |
| Author
Affiliation: |
Villa Julie College |
| Source: |
International Economic Journal, Winter 2001, v. 15, no. 4, pp. 81-94 |
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Publication Date: |
Winter 2001 |
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Abstract: |
This paper explores the time-varying
behavior of five EMS exchange rates namely, the Belgian Franc, Dutch
Guilder, French Franc, Italian Lira and the Spanish Peseta vis-a-vis the
Deutschemark from 1979 to 1998. The returns were examined using the
Sign- and Volatility-Switching GARCH model, which is capable of
accounting for potential asymmetries and the reversals in a series'
volatility structure. The results point to significant sensitivities of
the conditional variances of the French franc, the lira and the peseta
to adverse shocks but notable responsiveness to favorable shocks by
those of the other rates. Although asymmetry in the volatility structure
of all rates is found in the period prior to Germany's reunification in
1990, it vanishes thereafter. Volatility persistence for all rates is
noticeable in the first period but becomes more pronounced in the
second. |
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