Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212792 
Year of Publication: 
2014
Series/Report no.: 
BOFIT Discussion Papers No. 6/2014
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
The volatility of financial markets has been a relevant topic for transition economies, as the countries of Central and Eastern Europe and the former Soviet Union have seemingly en-dured high levels of volatility in their financial sectors during the transition process. But what have been the determinants of this financial volatility? This paper posits that institutional changes, and in particular the volatility of various crucial institutions, have been the major causes of financial volatility in transition. Examining 20 transition economies over various time-frames within the period 1993-2012, this paper applies the GARCH family of models to examine financial volatility as a function of institutional volatility. The results from the EGARCH and TGARCH modelling supports the thesis that more advanced and more stable institutions help to dampen financial sector volatility at their levels, while institutional volatility feeds through directly to financial sector volatility in transition.
Subjects: 
institutions
financial sector
volatility
transition
GARCH
EGARCH
TGARCH
JEL: 
G20
O43
P30
Persistent Identifier of the first edition: 
ISBN: 
978-952-6699-72-1
Document Type: 
Working Paper

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