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How credible are the exchange rate regimes of the EU accession countries? Empirical evidence from market sentiments

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Author Info
Christian Bauer ()
Bernhard Herz ()

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Abstract

EU accession countries have strong incentives to stabilize the exchange rate with respect to the Euro as the nominal anchor. We present a microstructure model of the foreign exchange market based on technical trading that allows to categorize the de facto the exchange rate regimes and derive a market based measure of the credibility of these exchange rate regimes.We empirically determine the de facto exchange rate regimes of EU accession countries and test their credibility as assessed by the market participants. In the run-up to EU accession most CEEC have reached high credibility in their exchange rate management. However, some of the future EU and EMU participants will have to strengthen their e.orts and further focus their exchange rate policy on stabilizing the Euro exchange rate.

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File URL: http://www.giw.uni-bayreuth.de/workingpapers/herz/EU-accession-FX-credibility.pdf
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Publisher Info
Article provided by Department of Economics, Economics I, Bayreuth University in its journal Eastern European Economics.

Volume (Year): 43 (2005)
Issue (Month): 3 ()
Pages: 55-77
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Handle: RePEc:uba:hadfwe:moe-techtrade_2004-1

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Related research
Keywords: monetary policy; credibility; EU accession; technical trading;

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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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References listed on IDEAS
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  5. Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996. "Fractionally integrated generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 74(1), pages 3-30, September. [Downloadable!] (restricted)
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  7. Jeanne, Olivier, 1999. "Currency Crises: A Perspective on Recent Theoretical Developments," CEPR Discussion Papers 2170, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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