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Monetary and Exchange Rate Stability at the EU Mediterranean Borders

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Author Info
Christian Bauer ()
Bernhard Herz ()

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Abstract

Stabilizing the exchange rate is a major monetary policy goal in a number of Mediterranean countries.We present a microstructure model of the foreign exchange market based on technical trading that allows us to categorize de facto exchange rate regimes and to derive a market based measure of the credibility of these exchange rate regimes. In our empirical analysis we compare the exchange rate policies of seven non European Mediterranean countries, Algeria, Egypt, Israel, Libya, Morocco, Turkey and Tunisia, with the benchmark of four European non EU countries namely Albania, Bulgaria, Croatia, and Romania. Our results indicate that the fundamental volatility of the market based ex- change rates is quite moderate and that markets assign a moderate degree of credibility to the exchange rate management of most of the countries.

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Publisher Info
Article provided by Department of Economics, Economics I, Bayreuth University in its journal Revue Economique, Les nouvelles frontières de l'Union Européenne.

Volume (Year): 57 (2006)
Issue (Month): Paris (4) ()
Pages: 899-917
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Handle: RePEc:uba:hadfwe:mediterranean-bauer-herz_2004-12

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Related research
Keywords: monetary policy; exchange rate policy; credibility; Mediterranean; Eastern Europe; technical trading;

Find related papers by JEL classification:
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
F31 - International Economics - - International Finance - - - Foreign Exchange

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  2. Peter Keller & Thomas J. Richardson, 2003. "Nominal Anchors in the CIS," IMF Working Papers 03/179, International Monetary Fund. [Downloadable!]
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    Other versions:
  5. Bensaid, Bernard & Jeanne, Olivier, 2000. " Self-Fulfilling Currency Crises and Central Bank Independence," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(4), pages 605-20, December. [Downloadable!] (restricted)
  6. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May. [Downloadable!] (restricted)
    Other versions:
  7. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  8. repec:rus:hseeco:181565 is not listed on IDEAS
  9. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September. [Downloadable!]
  11. Hung, Juann H, 1997. "Intervention strategies and exchange rate volatility: a noise trading perspective," Journal of International Money and Finance, Elsevier, vol. 16(5), pages 779-793, September. [Downloadable!] (restricted)
  12. Jeanne, Olivier, 1999. "Currency Crises: A Perspective on Recent Theoretical Developments," CEPR Discussion Papers 2170, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. K. Ronnie Sircar, George Papanicolaou, 1998. "General Black-Scholes models accounting for increased market volatility from hedging strategies," Applied Mathematical Finance, Taylor and Francis Journals, vol. 5(1), pages 45-82, March. [Downloadable!] (restricted)
  14. De Grauwe, Paul & Decupere, Danny, 1992. "Psychological Barriers in the Foreign Exchange Market," CEPR Discussion Papers 621, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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