English, Article edition: Volatility changes in drachma exchange rates Patricia Chelley-Steeley; Nikolaos Tsorakidis

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Bookmark: http://trove.nla.gov.au/version/50226
Physical Description
  • article
Language
  • English

Edition details

Title
  • Volatility changes in drachma exchange rates
Author
  • Patricia Chelley-Steeley
  • Nikolaos Tsorakidis
Physical Description
  • article
Notes
  • In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/​Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.
  • RePEc:taf:apfiec:v:19:y:2009:i:11:p:905-916
Language
  • English
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