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Title:Volatility transmission in emerging European foreign exchange markets PDF Logo
Authors:Bubák, Vít
Kocenda, Evézen
Zikes, Filip
Issue Date:2010
Series/Report no.:CESifo working paper Monetary Policy and International Finance 3063
Abstract:This paper studies the dynamics of volatility transmission between Central European currencies and euro/dollar foreign exchange using model-free estimates of daily exchange rate volatility based on intraday data. We formulate a flexible yet parsimonious parametric model in which the daily realized volatility of a given exchange rate depends both on its own lags as well as on the lagged realized volatilities of the other exchange rates. We find evidence of statistically significant intra-regional volatility spillovers among the Central European foreign exchange markets. With the exception of the Czech currency, we find no significant spillovers running from euro/dollar to the Central European foreign exchange markets. To measure the overall magnitude and evolution of volatility transmission over time, we construct a dynamic version of the Diebold-Yilmaz volatility spillover index, and show that volatility spillovers tend to increase in periods characterized by market uncertainty.
Subjects:foreign exchange markets
volatility
spillovers
intraday data
nonlinear dynamics
JEL:C50
F31
G15
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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