Exchange rate comovements, hedging and volatility spillovers on new EU forex markets

摘要

We analyze time-varying exchange rate co-movements, hedging ratios, and volatility spillovers on the new EU forex markets during 1999M1-2018M5. We document significant differences in the extent of currency comovements during various periods of market distress that are related to real economic and financial events. These imply favorable diversification benefits: the hedge-ratio calculations show all three currencies bring hedging benefits during crisis periods, but at different costs. During calm periods, most of the volatilities are due to each currency's own history. During the distress periods, volatility spillovers among currencies increase substantially and the Hungarian currency assumes a leading role. (C) 2018 Elsevier B.V. All rights reserved.