Volatility changes in drachma exchange rates

Patricia L. Chelley-Steeley, Nikolaos Tsorakidis

Research output: Contribution to journalArticle

Abstract

In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.
Original languageEnglish
Pages (from-to)905-916
Number of pages12
JournalApplied Financial Economics
Volume19
Issue number11
DOIs
Publication statusPublished - Jun 2009

Fingerprint

Euro zone
Exchange rates
Exchange rate volatility
Join
Union membership
European Monetary Union
News
Greece
Devaluation
Cumulative sum

Bibliographical note

Greece, eurozone, exchange rate volatility

Cite this

Chelley-Steeley, Patricia L. ; Tsorakidis, Nikolaos. / Volatility changes in drachma exchange rates. In: Applied Financial Economics. 2009 ; Vol. 19, No. 11. pp. 905-916.
@article{fe8f02e552344217932fa5d83ccaddc3,
title = "Volatility changes in drachma exchange rates",
abstract = "In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.",
author = "Chelley-Steeley, {Patricia L.} and Nikolaos Tsorakidis",
note = "Greece, eurozone, exchange rate volatility",
year = "2009",
month = "6",
doi = "10.1080/09603100701394579",
language = "English",
volume = "19",
pages = "905--916",
journal = "Applied Financial Economics",
issn = "0960-3107",
publisher = "Routledge",
number = "11",

}

Chelley-Steeley, PL & Tsorakidis, N 2009, 'Volatility changes in drachma exchange rates', Applied Financial Economics, vol. 19, no. 11, pp. 905-916. https://doi.org/10.1080/09603100701394579

Volatility changes in drachma exchange rates. / Chelley-Steeley, Patricia L.; Tsorakidis, Nikolaos.

In: Applied Financial Economics, Vol. 19, No. 11, 06.2009, p. 905-916.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Volatility changes in drachma exchange rates

AU - Chelley-Steeley, Patricia L.

AU - Tsorakidis, Nikolaos

N1 - Greece, eurozone, exchange rate volatility

PY - 2009/6

Y1 - 2009/6

N2 - In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.

AB - In January 2001 Greece joined the eurozone. The aim of this article is to examine whether an intention to join the eurozone had any impact on exchange rate volatility. We apply the Iterated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to a set of Greek drachma exchange rate changes. We find evidence to suggest that the unconditional volatility of the drachma exchange rate against the dollar, British pound, yen, German mark and ECU/Euro was nonstationary, exhibiting a large number of volatility changes prior to European Monetary Union (EMU) membership. We then use a news archive service to identify the events that might have caused exchange rate volatility to shift. We find that devaluation of the drachma increased exchange rate volatility but ERM membership and a commitment to joining the eurozone led to lower volatility. Our findings therefore suggest that a strong commitment to join the eurozone may be sufficient to reduce some exchange rate volatility which has implications for countries intending to join the eurozone in the future.

UR - http://www.scopus.com/inward/record.url?scp=67650290598&partnerID=8YFLogxK

UR - http://www.informaworld.com/openurl?genre=article&issn=0960-3107&volume=19&issue=11&spage=905

U2 - 10.1080/09603100701394579

DO - 10.1080/09603100701394579

M3 - Article

VL - 19

SP - 905

EP - 916

JO - Applied Financial Economics

JF - Applied Financial Economics

SN - 0960-3107

IS - 11

ER -