JEL classification: C32 E44 F31 F41 Keywords:Exchange rate volatility Bivariate GARCH Volatility spillover a b s t r a c tWe allow for monetary, real, and financial variables to assess the relevant importance of each of the variables to exchange rate volatility in the case of selected EMU members and candidate countries. Ex-ante analysis shows that volatility in the Polish zloty/ euro and the Hungarian forint/euro forex markets can be influenced by the monetary-side of the economy. On the other hand, ex-post analysis shows that forex markets in France, Italy and Spain had been influenced, during the pre-EMU era, by monetary and real shocks. However, the Irish pound exchange rate per ECU had been affected by only real shocks.

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This paper examines the short-run dynamic relationships between stock market and real activity, within a country, for the UK and the US. The Cross Correlation Function testing procedure is applied to test for causality in mean and in variance between the stock market and the real economic sector. Besides variance causation, volatility spillover effects are examined through the multivariate specification form of the Exponential GARCH model. There is evidence of significant reciprocal volatility spillovers between the two sectors within a country, implying stronger interdependencies in the UK rather than in the US and asymmetric behavior only in the case of the UK

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