Prague Economic Papers 2015, 24(6):678-698 | DOI: 10.18267/j.pep.530

The Euro Crisis and Contagion among Central and Eastern European Currencies: Recommendations for Avoiding Lending in a Safe Haven Currency such as CHF

Gábor Dávid Kiss, Tamás Schuszter
University of Szeged, Faculty of Economics and Business Administration, Institute of Finance and International Economic Relations, Szeged, Hungary (kiss.gabor.david@eco.u-szeged.hu).

This study analyses the Czech, Hungarian, and Polish currencies by examining the statistical characteristics of the Swiss franc as well as the ECB monetary policy in order to indicate shocks in these markets between 2002 and 2013. The abundance of monetary easing decisions can be used as a viable sign of market misbehaviour in addition to the low probability of extreme exchange rate fluctuations. Indeed, the temporal distribution of extreme currency fluctuations provides vital information about the nature of the recent crisis. Contagions can be defined as increased correlations during periods of crisis, while divergence means a significant decrease in this regard. Methodologically, common movements in this study were calculated by using DCC-GARCH modelling. The findings of this study underline the special features of the Swiss franc exchange rate, notably that its extreme fluctuations can be managed by using swap agreements and that it tended towards divergences during the crisis era. These results support the idea of avoiding lending in reserve currencies.

Klíčová slova: extreme interval, DCC-GARCH, currency market, contagion, CEE
JEL classification: C32, E44, E58, G01, G15

Zveřejněno: 1. leden 2015  Zobrazit citaci

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Kiss, G.D., & Schuszter, T. (2015). The Euro Crisis and Contagion among Central and Eastern European Currencies: Recommendations for Avoiding Lending in a Safe Haven Currency such as CHF. Prague Economic Papers, 24(6), 678-698. doi: 10.18267/j.pep.530
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