A Univariate Analysis of EMS Exchange Rates Using a Target Zone Model
AbstractThe models in the literature on exchange-rate target zones imply a non-linear time series model for the exchange rate. We show how the parameters of such models can be estimated and develop Maximum Likelihood and Method of Simulated Moments estimators for the target zone model of Krugman (1991). The Maximum Likelihood estimator is based on a computationally attractive approximation to the exact predictive density of the continuous time model. Monte Carlo experiments are used to assess the properties of this estimator. In the empirical part we estimate the model with data on recent EMS exchange rates. We find that the Krugman (1991) target zone model is not able to explain the full observed kurtosis and conditional heteroscedasticity of the exchange-rate returns. Copyright 1994 by John Wiley & Sons, Ltd.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 9 (1994)
Issue (Month): 1 (Jan.-March)
Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/0883-7252/
Other versions of this item:
- De Jong , F., 1991. "A Univariate Analysis of EMS Exchange Rates Using a Target Zone Model," Papers 9155, Tilburg - Center for Economic Research.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Eric Ghysels & Alain Guay, 1998.
"Structural Change Tests for Simulated Method of Moments,"
CIRANO Working Papers
- Ghysels, Eric & Guay, Alain, 2003. "Structural change tests for simulated method of moments," Journal of Econometrics, Elsevier, vol. 115(1), pages 91-123, July.
- Eric Guysels & Alain Guay, 1998. "Structural Change Tests for Simulated Method of Moments," Cahiers de recherche CREFE / CREFE Working Papers 61, CREFE, Université du Québec à Montréal.
- Taylor, Mark P. & Iannizzotto, Matteo, 2001. "On the mean-reverting properties of target zone exchange rates: a cautionary note," Economics Letters, Elsevier, vol. 71(1), pages 117-129, April.
- Consuelo Gámez Amián & José L. Torres, 2004. "A Non-parametric reassessment of target zone nonlinearities: The Spanish Peseta/Deutsche Mark exchange rate," Economic Working Papers at Centro de Estudios Andaluces E2004/73, Centro de Estudios Andaluces.
- António Portugal Duarte & João Sousa Andrade & Adelaide Duarte, 2010.
"Exchange Rate Target Zones: A Survey of the Literature,"
GEMF Working Papers
2010-14, GEMF - Faculdade de Economia, Universidade de Coimbra.
- António Portugal Duarte & João Sousa Andrade & Adelaide Duarte, 2013. "Exchange Rate Target Zones: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 27(2), pages 247-268, 04.
- José Torres, 2007.
"A non-parametric analysis of ERM exchange rate fundamentals,"
Springer, vol. 32(1), pages 67-84, April.
- José L. Torres, 2004. "A Non-parametric analysis of ERM exchange rate fundamentals," Economic Working Papers at Centro de Estudios Andaluces E2004/25, Centro de Estudios Andaluces.
- Miller, J. Isaac & Park, Joon Y., 2005. "How They Interact to Generate Persistency in Memory," Working Papers 2005-01, Rice University, Department of Economics.
- Ma, Yue & Kanas, Angelos, 2000. "Testing for nonlinear Granger causality from fundamentals to exchange rates in the ERM," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(1), pages 69-82, January.
- Mark P. Taylor & Stefan Reitz, 2013. "Exchange Rates in Target Zones - Evidence from the Danish Krone," Kiel Working Papers 1827, Kiel Institute for the World Economy.
- Bekaert, G.R.J. & Gray, S.F., 1997.
"Target zones and exchange rates: An empirical investigation,"
1997-22, Tilburg University, Center for Economic Research.
- Bekaert, Geert & Gray, Stephen F., 1998. "Target zones and exchange rates:: An empirical investigation," Journal of International Economics, Elsevier, vol. 45(1), pages 1-35, June.
- Geert Bekaert & Stephen F. Gray, 1999. "Target Zones and Exchange Rates: An Empirical Investigation," NBER Working Papers 5445, National Bureau of Economic Research, Inc.
- Galindo, Arturo J., 2000.
"Estimating credibility in Colombia's exchange-rate target zone,"
Journal of Development Economics,
Elsevier, vol. 63(2), pages 473-484, December.
- Arturo José Galindo, 1998. "Estimating Credibility In Colombia'S Exchange Rate Target Zone," BORRADORES DE ECONOMIA 002604, BANCO DE LA REPÚBLICA.
- Arturo José Galindo, . "Estimating Credibility in Colombia's Exchange Rate Target Zone," Borradores de Economia 103, Banco de la Republica de Colombia.
- Jes�s Rodríguez López & Hugo Rodríguez Mendizábal, 2007.
"The Optimal Degree of Exchange Rate Flexibility: a Target Zone Approach,"
Review of International Economics,
Wiley Blackwell, vol. 15(4), pages 803-822, 09.
- Jesús Rodríguez López & Hugo Rodríguez Mendizábal, 2006. "The optimal degree of exchange rate flexibility: A target zone approach," Working Papers 06.22, Universidad Pablo de Olavide, Department of Economics.
- Beetsma, Roel M. W. J., 1995. "EMS exchange rate bands: a Monte Carlo investigation of three target zone models," Journal of International Money and Finance, Elsevier, vol. 14(2), pages 311-328, April.
- Antoine Magnier & Benoît Cœuré, 1996. "Crédibilité et fondamentaux macro-économiques au sein du SME : un examen empirique," Économie et Prévision, Programme National Persée, vol. 123(2), pages 113-146.
- Flandreau, Marc, 1996.
"The Burden of Intervention: Externalities in Multilateral Exchange Rates Arrangements,"
CEPR Discussion Papers
1504, C.E.P.R. Discussion Papers.
- Flandreau, Marc, 1998. "The burden of intervention: externalities in multilateral exchange rates arrangements," Journal of International Economics, Elsevier, vol. 45(1), pages 137-171, June.
- Miller, J. Isaac, 2011. "Testing the bounds: Empirical behavior of target zone fundamentals," Economic Modelling, Elsevier, vol. 28(4), pages 1782-1792, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.