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| Author: | Neely, C. J. |
| Title: | Target zones and conditional volatility: The role of realignments |
| Journal: | Journal of Empirical Finance
1999 : APR, VOL. 6:2, p. 177-192 |
| Index terms: | Forecasting Exchange rates European Monetary System European Union |
| Freeterms: | EMU EMS |
| Language: | eng |
| Abstract: | This paper examines the relationship btw. the conditional volatility of target zone exchange rates and realignments of the system. To investigate the question, modified jump-diffusion Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and absolute value GARCH models are fit to six exchange rates of the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). There is some evidence that conditional volatility is higher around the periods of realignments. |
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