A Non-parametric reassessment of target zone nonlinearities: The Spanish Peseta/Deutsche Mark exchange rate
AbstractIn this paper we present evidence concerning the existence of target zone nonlinearities in the Spanish Peseta/Deutsche Mark exchange rate using data with daily frequency for the period 1989-1996. Using a non-parametric technique, the Alternation Conditional Expectations (ACE) algorithm, we obtain evidence of the existence of non-linearities in both exchange rate and interest rate differential, with a functional form close to the non-linear effects given by the target zone model with realignment risk.
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2004/73.
Length: 20 pages
Date of creation: 2004
Date of revision:
Target zones; exchange rate; realignment risk; ACE algorithm;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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