The Effect of Exchange Rate Regime on Transmission of Financial Conditions

Student: Limin Dmitrii

Faculty: International College of Economics and Finance

Educational Programme: Financial Economics (Master)

Year of Graduation: 2020

In my paper, I examine the effect of the exchange rate regime on the propagation of volatility shocks. I investigate the influence of the VIX index, calculated on the volatility of SP500 options, on stock returns in Russia, Ukraine, and Kazakhstan for the period 2004-2018. The results indicate that a floating exchange rate regime decreases the sensitivity of Russian stock returns to the volatility index. In the case of Ukraine and Kazakhstan, I found no effect of the exchange regime. The results for Russia are robust; they hold after we use the volatility index calculated by the Office of Financial Research.

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