Comovement of Exchange Rates: A Wavelet Analysis

In this article we investigate the behavior of exchange rates in Central and Eastern European countries. The results strongly indicate that interactions between exchange rates have different characteristics at different timescales. Our results show that CEE exchange rates are nearly perfectly integrated in the short and medium run, since the returns obtained in any of the CEE foreign exchange market can almost be explained by the overall performance in the other CEE markets. The discrepancies between CEE exchange rates are small, but increase within three to six months and that means in the long run the integration of foreign exchange markets is weak.