Volatility Regimes in Macroeconomic Time Series: The Case of the Visegrad Group
Year: 2011 Volume: 61 Issue: 6 Pages: 530-544
Abstract: The authors analyze several monthly and quarterly macroeconomic time series for the Czech Republic, Poland, Hungary, and Slovakia. These countries embarked on an economic transition in the early 1990s which ultimately led to their membership in the European Union, with Slovakia joining the euro area in 2009. It is natural to assume that changes of such a magnitude should also influence the major macroeconomic indicators. The authors explore the characteristics of these series by endogenously identifying their volatility regimes. In the course of their analysis, they show the difficulties in the handling of unit roots as a necessary step preceding volatility modeling. The final set of breaks identified shows very few changes near the beginning of the series, which corresponds to the transition period.
JEL classification: O11, C22, E00
Keywords: macroeconomic fluctuations, economic transition, structural breaks, volatility regimes, cumulative sum of squares, unit root testing
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