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On the Credibility of the Irish Pound in the EMS

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  • Francisco Ledesma-Rodriguez

    (Universidad de La Laguna)

  • Manuel Navarro-Ibanez

    (Universidad de La Laguna)

  • Jorge Perez-Rodriguez

    (Universidad de Las Palmas de Gran Canaria)

  • Simon Sosvilla-Rivero

    (FEDEA and Universidad Complutense de Madrid)

Abstract

This paper assesses the degree of credibility of the Irish Pound in the European Monetary System between 1983 and 1997. Different credibility indicators proposed in the literature are used to measure agents’ perceptions of the credibility of the ERM commitment in an attempt to distinguish between events stemming from problems in the ERM itself and those that appear to have been exclusive to Ireland.

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File URL: http://www.esr.ie/vol31_2/3Sosvilla.pdf
File Function: First version, 2000
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 31 (2000)
Issue (Month): 2 ()
Pages: 151-172

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Handle: RePEc:eso:journl:v:31:y:2000:i:2:p:151-172

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  1. Krugman, Paul R, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 669-82, August.
  2. Leonardo Bartolini, 1993. "Devaluation and Competitiveness in a Small Open Economy," IMF Working Papers 93/82, International Monetary Fund.
  3. Gomez-Puig, Marta & Montalvo, JoseG., 1997. "A new indicator to assess the credibility of the EMS," European Economic Review, Elsevier, vol. 41(8), pages 1511-1535, August.
  4. Svensson, Lars E. O., 1992. "The foreign exchange risk premium in a target zone with devaluation risk," Journal of International Economics, Elsevier, vol. 33(1-2), pages 21-40, August.
  5. Bertola, Giuseppe & Svensson, Lars E O, 1991. "Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models," CEPR Discussion Papers 513, C.E.P.R. Discussion Papers.
  6. Honohan, Patrick & Conroy, Charles, 1994. "Irish Interest Rate Fluctuations in The European Monetary System," Research Series, Economic and Social Research Institute (ESRI), number GRS165.
  7. Bertola, G. & Cabarello, R.J., 1990. "Target Zones And Realignments," Discussion Papers 1990_51, Columbia University, Department of Economics.
  8. Rose, Andrew K. & Svensson, Lars E. O., 1994. "European exchange rate credibility before the fall," European Economic Review, Elsevier, vol. 38(6), pages 1185-1216, June.
  9. Darvas, Zsolt, 1998. "Spurious Correlation in Exchange Rate Target Zone Modelling: Testing the Drift Adjustment Method on the US Dollar, Random Walk and Chaos," CEPR Discussion Papers 1890, C.E.P.R. Discussion Papers.
  10. Simon Sosvilla-Rivero & Fernando Fernandez-Rodriguez & Oscar Bajo-Rubio, 1999. "Exchange rate volatility in the EMS before and after the fall," Applied Economics Letters, Taylor & Francis Journals, vol. 6(11), pages 717-722.
  11. Lindberg, Hans & Soderlind, Paul & Svensson, Lars E O, 1993. "Devaluation Expectations: The Swedish Krona 1985-92," Economic Journal, Royal Economic Society, vol. 103(420), pages 1170-79, September.
  12. Lars E. O. Svensson, 1991. "The Simplest Test of Target Zone Credibility," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 655-665, September.
  13. Walsh, Brendan, 1993. "Credibility, Interest Rates and the ERM: The Irish Experience," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(4), pages 439-52, November.
  14. Weber, A., 1991. "EMS Credibility," Discussion Paper 1991-3, Tilburg University, Center for Economic Research.
  15. Rudiger Dornbusch, 1988. "Credibility, Debt and Unemployment: Ireland's Failed Stabilization," NBER Working Papers 2785, National Bureau of Economic Research, Inc.
  16. Edin, Per-Anders & Vredin, Anders, 1993. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 161-75, January.
  17. Weber, A.A., 1991. "EMS Credibility," Papers 9103, Tilburg - Center for Economic Research.
  18. Jeroen J. M. Kremers, 1990. "Gaining Policy Credibility for a Disinflation: Ireland's Experience in the EMS," IMF Staff Papers, Palgrave Macmillan, vol. 37(1), pages 116-145, March.
  19. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Laurence Fung & Ip-wing Yu, 2007. "Assessing the Credibility of The Convertibility Zone of The Hong Kong Dollar," Working Papers 0719, Hong Kong Monetary Authority.
  2. Jesús Rodríguez López & Hugo Rodríguez Mendizábal, 2003. "How Tight Should Central Bank’s Hands be Tied? Credibility, Volatility and the Optimal Band Width of a Target Zone," Economic Working Papers at Centro de Estudios Andaluces E2003/24, Centro de Estudios Andaluces.
  3. Jesús Rodríguez López & Hugo Rodríguez Mendizábal, 2003. "How Tight Should One's Hands Be Tied? Fear of Floating and Credibility of Exchange Rate Regimes," Working Papers 96, Barcelona Graduate School of Economics.
  4. Jesús Rodríguez López & Hugo Rodríguez Mendizábal, 2006. "How tight should one's hands be tied? Fear of floating and credibility of exchange regimes," Working Papers 06.03, Universidad Pablo de Olavide, Department of Economics.
  5. Francisco Ledesma-Rodríguez & Manuel Navarro-Ibáñez & Jorge Pérez-Rodríguez & Simón Sosvilla-Rivero, . "The Credibility of the European Monetary System: A Review," Studies on the Spanish Economy 179, FEDEA.
  6. Francisco Ledesma-Rodriguez & Manuel Navarro-Ibanez & Jorge Perez-Rodriguez & Simon Sosvilla-Rivero, 2005. "Assessing the credibility of a target zone: evidence from the EMS," Applied Economics, Taylor & Francis Journals, vol. 37(19), pages 2265-2287.
  7. Viktors Ajevskis & Armands Pogulis, 2005. "Repegging of the Lats to the Euro: Implications for the Financial Sector," Working Papers 2005/01, Latvijas Banka.

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