Financial contagion, interest rates and the role of the exchange rate as shock absorber in Central and Eastern Europe

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dc.contributor Bank of Finland
dc.contributor.author Habib, Maurizio Michael
dc.date.accessioned 2014-09-22T08:00:05Z
dc.date.available 2014-09-22T08:00:05Z
dc.date.issued 2002
dc.identifier.isbn 951-686-830-4
dc.identifier.issn 1456-4564
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/8047
dc.description.abstract This paper studies the impact of external factors on daily exchange rates and short-term interest rates in the Czech Republic, Hungary and Poland during the period August 1997 - May 2001.Ind that neither exchange rates nor interest rates are influenced by short-term German interest rates.Nevertheless, 1 show that shocks to emerging-market risk premia had a significant impact on exchange rates in all three Central and Eastern European countries and on interest rates in the Czech Republic.In addition, studying the second moment of the variables, 1 demonstrate that Czech and Polish exchange rates were affected by 'volatility contagion' coming from emerging markets. 1 find also some partial support for the 'volatility contagion' hypothesis on Czech interest rates.These findings shed some doubts on the alleged theoretical ability of a floating exchange rate - such as in the Czech Republic - to absorb external shocks and insulate a country's domestic monetary policy completely.However, the spill-over effect on Czech interest rates might be explained by the 'managed' nature of the exchange rate regime, thereby re-establishing some credibility of the theory. Key words: exchange rates, short-term interest rates, volatility, Czech Republic, Hungary, Poland
dc.format.extent 42 s.
dc.language.iso eng
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject korot
dc.subject volatiliteetti
dc.subject valuuttakurssit
dc.subject häiriöt
dc.subject Puola
dc.subject Tsekki
dc.subject Unkari
dc.subject SP
dc.subject Bofit-kokoelma
dc.title Financial contagion, interest rates and the role of the exchange rate as shock absorber in Central and Eastern Europe
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-201408072043
dc.series.name BOFIT Discussion Papers
dc.series.year 2002
dc.series.number 7/2002
dc.series.sortingnumber 7
dc.date.publication 30.6.2002
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)

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