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Exchange Rate Volatility in the Balkans and Eastern Europe: Implications for International Investments

  • Alexandra HorobetEmail author
  • Lucian Belascu
  • Ana-Maria Barsan
Chapter
Part of the Contributions to Economics book series (CE)

Abstract

Our paper’s objective is to study the volatility of exchange rates from the region that have not yet adopted the Euro and are not members of the Exchange Rate Mechanism II by considering the exchange rate regime and the implications of currency volatility for foreign capital flows. We model exchange rate volatility by using standard deviations of daily logarithmic changes in the exchange rates, rolling standard deviations, Hodrick-Prescott filters to detect the trends in volatility and ARIMA models. We find that currency volatility remains a strong issue for these countries and that central banks have attempted to manage it, particularly after the global financial crisis. Spikes in monthly volatility are identified for all currencies, although with some variation in time. Over the long-run, some exchange rates experienced sudden increases in volatility over the entire period, but rather quickly corrected, while others have shown an episode of high volatility at the beginning of the period and recorded a reasonable level of volatility throughout the remaining period. Exchange rate volatility “has memory”, but some exchange rates are more prone to the persistent effects of shocks in volatility.

Keywords

Exchange rates Volatility Eastern Europe Balkans 

JEL Classification Codes

F31 F37 G17 

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Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  • Alexandra Horobet
    • 1
    Email author
  • Lucian Belascu
    • 2
  • Ana-Maria Barsan
    • 3
  1. 1.Bucharest University of Economic StudiesBucharestRomania
  2. 2.Lucian Blaga University of SibiuSibiuRomania
  3. 3.University of BucharestBucharestRomania

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