Open Economies Review

, 20:589

Fundamentals and Technical Trading: Behavior of Exchange Rates in the CEECs

Research Article

DOI: 10.1007/s11079-008-9095-3

Cite this article as:
Bask, M. & Fidrmuc, J. Open Econ Rev (2009) 20: 589. doi:10.1007/s11079-008-9095-3

Abstract

We incorporate technical trading into the monetary approach to exchange rates, and estimate the model for four Central and Eastern European countries that introduced the policy of free floating in the late 1990s; the Czech Republic, Hungary, Poland and Slovakia. We find that past exchange rates contribute significantly to the determination of the spot exchange rate. We also find a feedback behavior driving the exchange rate to its fundamental value although the mean reversion parameter is small. Overall, this means that these currency markets have developed a complex structure of different trader types, which already is documented for developed countries.

Keywords

Autoregression Foreign exchange Fundamental analysis Mean reversion Technical analysis 

JEL Classification

C32 F31 F36 

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.Monetary Policy and Research DepartmentBank of FinlandHelsinkiFinland
  2. 2.Department of EconomicsUniversity of MunichMunichGermany
  3. 3.CESifoMunichGermany
  4. 4.Comenius University in BratislavaBratislavaSlovakia

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