A Strange Animal? The Swiss Franc Exchange Rate as a "Captured" Random Walk
AbstractThe paper aims to describe the behavior of the Swiss Franc - Deutsch Mark exchange rate between January 1980 and December 1998. Contrary to research results provided for other currencies a random walk is not sufficient to describe the empirical characteristics of the Swiss Franc. A regime switching approach shows that changes in the spot rate levels alternate between two regimes: a random walk and an autoregressive process. Mean reverting forces exist that "capture" the random walk within elastic bounds. Equally, we find that the volatility of the process is better described by a regime switching model and that low levels of volatility are associated with exchange rate movements close to a level of 0.80 SFR per DEM.
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.
Bibliographic InfoArticle provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.
Volume (Year): 141 (2005)
Issue (Month): IV (December)
Contact details of provider:
Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
Phone: +41 (0)44 631 32 34
Fax: +41 (0)44 631 39 01
Web page: http://www.sjes.ch
More information through EDIRC
nominal exchange rate; regime switching; random walk;
Find related papers by JEL classification:
- F00 - International Economics - - General - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christopher F. Baum & Mustafa Caglayan & John Barkoulas, 1998.
"Nonlinear Adjustment to Purchasing Power Parity in the post-Bretton Woods Era,"
Boston College Working Papers in Economics
404., Boston College Department of Economics, revised 16 Nov 1999.
- Baum, Christopher F. & Barkoulas, John T. & Caglayan, Mustafa, 2001. "Nonlinear adjustment to purchasing power parity in the post-Bretton Woods era," Journal of International Money and Finance, Elsevier, vol. 20(3), pages 379-399, June.
- Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Steiner).
If references are entirely missing, you can add them using this form.