This paper investigates how oil price changes affect consumer price inflation in eleven Central and Eastern European countries. We use a wavelet-based Markov switching approach in order to distinguish between the effects at different time horizons. We find that the transmission of oil price changes to inflation is relatively low in the Central and Eastern European countries as an increase in the oil price of 100% is followed by a rise in inflation of 1-6 percentage points. The strongest impact from rising oil price on inflation is found for the longer time-horizons for most of the countries, which means that the indirect spillover effect is more intensive than the direct one. Also, the results indicate that exchange rate is not a significant factor when oil shocks are transmitted towards inflation, except in the occasions when high depreciation occurs. Slovakia and Bulgaria are the countries which experience the highest and most consistent pass-through effect throughout the observed sample, and this may be due to these countries having some of the highest oil import/GDP ratios. ARTICLE HISTORY

This paper investigates multiscale dynamic interconnection between the five agricultural commodities – corn, wheat, soybean, rice and oats, covering more than 18 years period. For research purposes, two complementary methodologies were used – wavelet coherence and phase difference. Low coherence is present at shorter time-horizons, while at longer time-horizons high coherence areas are found, but they are not widespread in all wavelet coherence plots. These results speak in favour of diversification opportunities. Strong coherence in longer time-horizons indicates that common factors are likely to be the main determinants of the agricultural prices in the long-run. On the other hand, rare high coherence areas at lower scales suggest that monetary and financial activities are most likely the causes that have affected the comovements of the grain prices in the short-term horizons. Phase difference discloses a relatively stable pattern between corn-soybean, corn-wheat, rice-oats and oats-soybean in the longer time-horizons. Taking into account investors’ diversification benefits and the leading (lagging) connections in long-run, corn and oats are the most appropriate cereals to be combined in an n-asset portfolio, since these two cereals constantly and very steadily lag soybean, whereas strong coherence between corn and oats does not frequently occur in all wavelet scales.

This paper investigates the dynamic conditional correlation (DCC) between stock returns and exchange rate in four East European emerging markets. Due to persistent long memory and the presence of the asymmetric effect in all asset markets we applied DCC-FIAPARCH model. The estimated negative DCC parameters in all scrutinized countries confirmed that portfoliobalanced theory has predominance in the short run in all selected economies. DCC parameters revealed significant time-varying behaviour, especially during the major crisis periods. By embedding dummy variables in the variance equations, we came to the conclusion that global shocks affect the volatility of DCCs. Particularly, it happened during the Global Financial Crisis and European sovereign debt crisis, but the effects were not linearly equal in all countries. Complementary rolling analysis unveils how conditional volatilities of analysed assets influence DCC. The results suggested that exchange rate conditional volatility has higher influence on DCC than stock conditional volatility.

This paper explores bidirectional linkage between inflation and its uncertainty by observing monthly data of 11 Eastern European countries. The methodological approach comprises two steps. First, inflation uncertainty series have been created by choosing an optimal Generalized Autoregressive Conditional Heteroskedasticity-(GARCH) type model. Subsequently, inflation and inflation uncertainty have been observed together by two models examining whether Friedman's and Cukierman-Meltzer's hypotheses hold for selected Eastern Europe Countries (EEC). Due to the heterogeneous behaviour of some series of inflation and inflation uncertainty, the unconditional quantile regression estimation technique has been applied because of its robustness to the particular non-normal characteristics and outliers' presence in the empirical data. According to the findings, both Friedman's and Cukierman-Meltzer's hypotheses have been confirmed primarily for the largest EEC with flexible exchange rate. In contrast, these theories are refuted in smaller, open economies with firm exchange rate regime.

No abstract

This paper strives to investigate the level of business cycles synchronisation between 8 Central and Eastern European Countries (CEEC) and the EU-15. We use wavelet coherence and phase difference methodology as a very suitable tool that observes simultaneously the strength of business cycles’ co-movement in the aspect of time as well as in the aspect of frequency. The results indicate that the business cycles of CEECs are generally synchronised with the EU-15 business cycles, whereas distinct differences existed before, during, and after the financial crisis (2008–2009) and during the European sovereign debt crisis (2010–2011). In other words, we demonstrate that very strong business cycles synchronisation occurred in almost all CEECs during crisis periods and at higher wavelet scales, while only moderate synchronisation is recorded in relatively tranquil periods at higher frequencies. The results suggest that smaller CEECs, but also larger countries such as the Czech Republic, Hungary, and to some extent Slovakia as well have a higher level of business cycles synchronisation with the EU-15, particularly in the crisis period at short-run as well as at long-run fluctuations. However, we do not find strong business cycles co-movement in cases of Poland and Latvia via HP and BP filters at higher frequencies during the crisis, which might indicate a higher resistance of these countries to external systemic shocks.

The objective of the paper is to determine whether the linkage between stock returns and exchange rates in several Eastern European countries was in accordance with the flow oriented model or the portfolio-balance approach. The dynamic interdependence between exchange rate and stock returns is determined using the Dynamic Conditional Correlation (DCC) framework. The results pointed to a negative dynamic correlation which is in line with portfolio-balance approach. Rolling regression revealed that conditional correlation was affected primarily by conditional volatility of currency, while the impact of stock returns volatility was negligible. S28Dynamic Correlation Between Stock Returns and Exchange Rate S29 the portfolio-balance approach. The flow oriented model asserts that appreciation/depreciation of domestic currency decreases/increases the international competitiveness which eventually influences the balance of trade position as well as country's output. Higher/lower cash flows of companies are consequently transferred to the higher/lower values of stock prices. This stance focuses on the current account of the country's trade balance and advocates a positive correlation between two variables. On the other hand, portfolio-balance approach accentuates country's capital account and demand/supply on the stock markets as well as currency market. It predicts that currency depreciation will cause lower demand of domestic stocks which eventually diminishes their value, while currency appreciation will render the opposite effect. Consequently, portfolio-balance approach advocates negative correlation between these categories.This paper analyses the dynamic interdependence between exchange rate and stock returns in four major East European emerging countries (the Czech Republic, Hungary, Poland and Russia) which did not conduct the policies of the fixed exchange rate in the observed period. Some of those countries have led a de facto flexible exchange rate (the Czech Republic and Poland), while Hungary has pursued a fixed regime with wide bands. The Russian currency was characterized by tight management until 2008, followed by greater flexibility afterwards. The paper has a three-fold contribution. Firstly, it supplements the existing literature on this topic. As claimed by Ulku and Demirci, (2012), there is a lack of research conducted on correlation between stock markets and exchange rates in European emerging markets. Secondly, the analysis is done by using Dynamic Conditional Correlation (DCC) multivariate GARCH models developed by Engle (2002), which could indicate a more direct interdependence between these two assets. This particular approach allows the correlations to change over time, utilizing the flexibility of univariate GARCH but without the perplexity of conventional multivariate GARCH. It implies computational advantages of DCC model over multivariate GARCH models, meaning that the number of parameters to be estimated in the correlation process is independent of the number of series to be correlated, En...

No abstract