Advertisement

Economics of Planning

, Volume 27, Issue 3, pp 277–292 | Cite as

Exchange rate volatility in high inflation economies: An econometric study of Poland and Brazil

  • Renato G. FlôresJr.
  • Marcos De B. Monteiro
  • Ariane Szafarz
Article

Abstract

This paper analyses exchange rate series for Poland and Brazil. The Polish series, related to the period soon after the first liberalizing measures, presents a high volatility which is not accounted for by some selected ‘fundamentals’. The Brazilian series, though also keeping evidence of excessive volatility, is cointegrated with fundamentals similar to those of the Polish case. This raises the issue of a learning process taking place during persistent inflations. Unsuccessful one-shot stabilization plans can reinforce this process, leaving a lasting imprint in the excessive volatility pattern. The message seems clear, though maybe not easy to implement: agents take some time to learn to live in non-stable environments; to avoid this by one-shot measures — if unsuccessful — can have a very high cost and pre-empt future corrections.

Keywords

Exchange Rate Paper Analyse Rate Series High Volatility Analyse Exchange 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Chanel, O. (1993), Apports de l'économétrie à l'étude des champs culturels: applications au marché des oeuvres d'art et à la demande télévisuelle, Thèse de Doctorat, E.H.E.S.S., France.Google Scholar
  2. Charemza, W.J. (1991), The free market for foreign exchange in Poland: cointegration, speculative bubbles and error corrections. Processed, University of Leicester.Google Scholar
  3. Gourieroux, C. (1992),Modèles ARCH et Applications Financières, Economica, Paris.Google Scholar
  4. Hall, A. (1989), ‘Testing for a unit root in the presence of moving average errors’,Biometrika, 76, 49–56.Google Scholar
  5. Johansen, S. (1988), ‘Statistical analysis of cointegration vectors’,Journal of Economic Dynamics and Control, 12, 231–254.Google Scholar
  6. Ljung, G.M. and G.E.P. Box (1978), ‘On a measure of lack of fit in time series models’,Biometrika, 65, 297–303.Google Scholar
  7. Krugman, P.R. (1991), ‘Has the adjustment process worked?’,Policy Analyses in International Economics, 34, Institute of International Economics, Washington.Google Scholar
  8. Phillips, P.C.B. and P. Perron (1988), ‘Testing for a unit root in time series regression’,Biometrika, 75, 335–346.Google Scholar
  9. Said, S.E. and D.A. Dickey (1984), ‘Testing for unit roots in autoregressive-moving average models of unknown order’,Biometrika, 71, 599–607.Google Scholar
  10. Schwert, G.W. (1987), ‘Effects of model misspecification on tests for unit roots in macroeconomic data’,Journal of Monetary Economics, 20, 73–103.Google Scholar
  11. West, K.D. (1988), ‘Asymptotic normality, when regressors have a unit root’,Econometrica, 56, 1397–1417.Google Scholar
  12. White, H. (1980), ‘A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity’,Econometrica, 48, 817–838.Google Scholar
  13. Zini A.A. Jr., (1993),Taxa de câmbio e politica cambial no Brasil, Editora da Universidade de Sao Paulo, Sao Paulo.Google Scholar

Copyright information

© Kluwer Academic Publishers 1994

Authors and Affiliations

  • Renato G. FlôresJr.
    • 1
  • Marcos De B. Monteiro
    • 2
  • Ariane Szafarz
    • 3
  1. 1.ULB, Bruxelles and EPGE/FGVRio de JaneiroBrazil
  2. 2.EPGE/FGVRio de JaneiroBrazil
  3. 3.CEME and ECARE, ULBBruxellesBelgium

Personalised recommendations