A non-parametric analysis of ERM exchange rate fundamentals
AbstractIn this paper we present evidence concerning the number of common stochastic trends in three major ERM exchange rates. The results indicate the presence of a single common trend driving these currencies and from this we suggest that the common trend can be considered as the ERM non-parametric fundamentals for the three selected currencies. Using a non-parametric technique, the Alternating Conditional Expectations (ACE) algorithm, we obtain evidence of the existence of non-linearities for two out of three currencies with a functional form, related to the estimated non-parametric fundamentals, close to the S-shape given by the basic target zone model.
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 32 (2007)
Issue (Month): 1 (April)
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Other versions of this item:
- 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.
- F31 - International Economics - - International Finance - - - Foreign Exchange
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