Apostolos Kiohos

Post-Communist Countries of the EU and the Euro: Dynamic Linkages between Exchange Rates

The sovereign debt crisis of 2010 in the euro area significantly decelerated the monetary integration of the EU. The main purpose of this paper is to explore whether five post-communist member states of the EU are mature enough to adopt the euro. We used nominal exchange rates in the error correction model with asymmetric power ARCH (ECM-APARCH). Our results highlight that EU membership positively increased the impact of the euro on the currency of each of these countries in the short-run. In contrast, the long-term effect of the euro on each currency is negative for the Czech Republic, Hungary, and Croatia. Wholly different results were obtained for Poland and Romania. The APARCH model showed that the negative responses of the euro had a greater or neutral effect on the conditional variance of each currency instead of the positive responses. The debt crisis of the euro area had no impact on the dynamic linkages between the currencies. Our research concludes that Croatia, the Czech Republic, and Hungary are not ready to join the euro area in the near future. On the other hand, the currencies of Poland and Romania are already aligned with the fluctuations of the euro.

Feedback Trading Strategies: The Case of Greece and Cyprus

Abstract This paper examines whether or not feedback trading strategies are present in the Athens (ASE) and Cyprus Stock Exchanges (CSE). The analysis employs two econometric models: the feedback trading strategy model, introduced by Sentana and Wadhwani (1992), and the exponential autoregressive model, proposed by LeBaron (1992). These two theoretical frameworks, separately, were joined with the FIGARCH (1, d, 1) approach. Both models assume two different groups of traders - the “rational” investors that build their portfolio by following the firms’ fundamentals and the “noise” speculators that ignore stock fundamentals and focus on a positive (negative) feedback trading strategy. The empirical results revealed that negative feedback trading strategies exist in the two underlying stock markets

The Euro Area: Does one currency fit all?

ABSTRACT The sovereign debt crisis since the late 2000s in the Euro Area revealed that, in reality, there are two monetary unions in Europe: the core and the periphery. The core-north countries have sounder fiscal balances and lower inflation rates, whereas the periphery-south ones are more prone to higher inflation and public deficits. The principal aim of this paper is to explore which countries handle the nominal exchange rate of the euro. By doing this we will effectively challenge the statement ‘.one size fits all’ upon which the euro project was built. We used the real exchange rates of the initial 12 Eurozone members as an empirical instrument. Our evidence is based on the bivariate regression analysis and the Asymmetric Component GARCH (AC-GARCH) model. We discovered that the countries of the Eurozone core influence more the euro nominal exchange rate than the periphery ones. In addition, the euro is more vulnerable to the volatility shocks of the German and the French real exchange rates.

Re-Exploring the Enlargement of the Eurozone: Evidence from the New Member-States

ABSTRACT The debt crisis of the Euro Area in 2010 raised plenty of doubts concerning the sustainability of the monetary union. Eurozone includes economies which have different structural characteristics. This event does not allow the establishment of an optimal currency area. The present research attempts to explore if the join of Cyprus, Malta, Latvia, Slovenia and Slovakia in the Eurozone was in favor of their economies. We used the nominal exchange rates as a financial instrument by combing the Error Correction Model with the Threshold GARCH, ECM-TGARCH. The empirical findings highly support that the EU membership influenced positively the relationship between the euro and the Cypriot Pound, the Latvian Lats and the Slovenian Tolar. On the contrary, we discovered that the join of Malta in the EU had a slightly negative and a long-term impact in the relationship between the euro and the Maltese currency. Finally, the entrance of Slovakia in the EU influenced positively the Slovakian currency. However, the relationship between the euro and the Slovakian Koruna remained negative.

Transmission of News in Eurozone Bank Holdings and European Bank Markets in the Light of the Greek Debt Crisis

This article examines the interdependence of European bank sectors under two different aspects. First, we investigate the symmetric transmission mechanism between six Eurozone countries’ (Germany, France, Greece, Ireland, Italy and Spain) bank holdings in order to uncover the volatility and error interrelationship of these holdings and their impact on the Greek bank holdings. Also, we analyse the impact from the Greek bank holdings on the other Eurozone countries’ bank holdings. In addition, we examine the impact of the Greek bank holdings on the transmission mechanism among all six cross-country bank indices. Second, we investigate the interrelationship of Greek bank market with two emerging cross-country bank indices and two developed ones. The two groups concern Greece, France and Germany and Greece, Poland and Czech Republic, respectively. We find very strong volatility and error spillovers for five Eurozone countries’ (Germany, Greece, Ireland, Italy and Spain) bank holdings, whereas French bank holdings are less integrated with the other five ones. Moreover, the results indicated that the Greek bank market is integrated better with the two emerging bank indices rather than the two developed ones. In addition, the Greek debt crisis seemed to play an important role on the volatility transmission mechanism since the volatility and error spillovers are larger in magnitude in the after-crisis period than in the pre-crisis period for both groups of countries. Based on the results regarding the degree of volatility persistence, the number of days that the innovations in the post-crisis period last is larger than the number of days of the pre-crisis period for both groups of countries under study. JEL Classification: G15, G20, C61, C3

A comparison between the recent financial crisis of 2008 and the crisis of 1999 in the Athens Stock Market

This paper examines the two financial crises of the Athens Stock Market during the last decade, in order to help investors and academics to understand better its attitude in periods of crises. In this analysis, it was employed a Quandt-Andrews Test, a GJR-GARCH model with two diagnostic tests and a BDS independence test. The results have showed that in the most recent crisis the asymmetries were almost similar as they were in the crisis of 1999, however, the magnitude of volatility in 2008, which was specifically created by big negative shocks, was higher. Contrasting the above results with the estimation of the middle period, it was found that in the middle period there was a positive size bias, while on the contrary in the periods of crises there was a negative one. Finally, we point out the existence of chaotic autocorrelations in both crises, affecting the ASE index non-linearly.