Interest-rate differentials, speculative capital flows and exchange-rate volatility

• Authors: Abel Istvan , Kobor Adam
• Languages of publication: HU

Abstracts

EN

Interest rates on the Hungarian forint are higher than interest rates in the Euro area or other countries in the region. Interest-rate decisions are based on assessing several factors in monetary policy. This paper evaluates the effects of a sizable interest-rate differential between Hungary and the Euro area on the exchange rate and on its volatility. There is a difference in the effects of the interest-rate differential on the exchange rate in the short run and in the long run, but a higher interest-rate differential tends to increase exchange-rate volatility on both horizons. There is a triangular relation between interest-rate differential, speculative capital flows, and exchange-rate volatility. Any angle in this triangular relation points to the importance of the financial-stability consideration in forming monetary policy.

Keywords

EN

EVENT STUDIES; FOREIGN EXCHANGE; INFORMATION AND MARKET EFFICIENCY

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2008
• Volume: 55
• Issue: 11
• Pages: 941-961
• Document type: ARTICLE

Contributors

author

Abel Istvan

author

Kobor Adam

• Istvan Abel, no address given, contact the journal editor

Identifiers

CEJSH db identifier

10HUAAAA07879