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EXCHANGE RATE VOLATILITY IN THE V4 COUNTRIES

Keywords: Exchange rates , forecasts , V4 countries , conditional heteroscedasticity

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Abstract:

This paper deals with the analysis of the V4 countries' currencies daily exchange rates against the euro (EUR) arid the US dollar (USD) for the period 1 or 4 January 1999 - 25 October 2007. The asymmetric volatility of the individual logarithmic exchange rate returns was captured using the conditional heteroscedasticity models EGARCH (1,1) - M and/or EGARCH (1,1). Taking into account these models, the static forecasts for logarithmic exchange rate returns were calculated and the forecasted values of exchange rates for the next business day (26 October 2007) were compared with the actual values.

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