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Regime dependence between the official and parallel foreign currency markets for US dollars in Greece

Kanas, Angelos, Kouretas, Georgios P. (2007) Regime dependence between the official and parallel foreign currency markets for US dollars in Greece. Journal of Macroeconomics, 29 (2). pp. 431-449. ISSN 0164-0704. (doi:10.1016/j.jmacro.2005.11.003) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL
http://dx.doi.org/10.1016/j.jmacro.2005.11.003

Abstract

This paper models the short-run as well as the long-run relationship between the parallel and official markets for US dollars in Greece in a bivariate Markov Switching Vector Error Correction Model (MS-VECM) framework. Modelling exchange rates within this context can be motivated by the fact that the change in regime should be considered as a random event and not predictable. The results show that linearity is rejected in favour of a MS-VECM specification, which forms statistically an adequate representation of the data. Two regimes are implied by the model; the high volatility regime and the low volatility one and they provide quite accurately the state of volatility associated with economic and political events that took place in Greece during the 1970s and 1980s. Another implication is that there is evidence of regime clustering. Finally, Granger causality seems to be regime independent when we consider the hypothesis that official rate causes the parallel rate but it is regime dependent when we consider the opposite direction. © 2007 Elsevier Inc. All rights reserved.

Item Type: Article
DOI/Identification number: 10.1016/j.jmacro.2005.11.003
Uncontrolled keywords: Impulse response function, Non-linearity, Parallel market premium, Regime switching
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Tracey Pemble
Date Deposited: 22 May 2014 14:24 UTC
Last Modified: 29 May 2019 12:36 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/41154 (The current URI for this page, for reference purposes)
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