Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/219620 
Authors: 
Year of Publication: 
2015
Series/Report no.: 
Institute of Economic Research Working Papers No. 4/2015
Publisher: 
Institute of Economic Research (IER), Toruń
Abstract: 
During the financial crisis a notion that the Polish exchange rate is not determined effectively was very dominant, because of a contagion effect of the global financial crisis on the Polish economy. In addition, many foreign exchange market analysts explained developments in the Polish exchange market trough a hypothesis that the Polish zloty exchange rate follows other exchange rates. This contradicts market efficiency as this would lead to profitable arbitrage possibility based on past information on other currency prices and possibly gives a rationale for government intervention. In contrast, a foreign exchange market that is efficient needs no government involvement and its participants cannot earn abnormal gains from foreign exchange transactions. Therefore, the aim of the article is to examine the efficiency of the Poland's foreign exchange market. In order to test for market efficiency a cointegration analysis is used. The main argument builds on the semi-strong form of the market efficiency hypothesis. On an informational effective market a pair of prices cannot be cointegrated, because this would imply predictability of one asset price based on the past prices of the other asset. The main hypothesis of the article is verified using Unit Root tests and Johansen Cointegration Test on the pair of EURPLN and USDPLN exchange rates. It is shown that the null hypothesis cannot be rejected; therefore, the Polish foreign exchange market is efficient in the semi-strong sense.
Subjects: 
foreign exchange market efficiency
cointegration analysis
JEL: 
E43
E52
E58
F41
F42
C32
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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