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 Habib, Maurizio Michael 2014-09-22T08:00:05Z 2014-09-22T08:00:05Z 2002
dc.identifier.isbn 951-686-830-4
dc.identifier.issn 1456-4564
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.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 BOFIT Discussion Papers
dc.series.year 2002
dc.series.number 7/2002
dc.series.sortingnumber 7 30.6.2002
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)

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