Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate
AbstractThis paper estimates a simple model of the exchange rate between the East and West German Mark immediately preceding German monetary union. Although there is a theoretical literature on exchange rate dynamics when the introduction of a fixed exchange rate is anticipated, the absence of data has limited empirical work on the subject. We show that in the first part of the sample, the DM-Ostmark exchange rate behaves as a random walk. In the second half, when monetary union appeared more likely, the exchange rate behaves as a weighted average of fundamentals and the expected "terminal" exchange rate.
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 18 (1993)
Issue (Month): 3 ()
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Other versions of this item:
- Burda, Michael C & Gerlach, Stefan, 1990. "Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate," CEPR Discussion Papers 485, C.E.P.R. Discussion Papers.
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