This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Macroeconomic Instability in the European Monetary System?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Amalia Morales Zumaquero () (Universidad de Málaga)
Simón Sosvilla Rivero () (FEDEA, UCM)

Additional information is available for the following registered author(s):

Abstract

This paper analyses the impact of the establishment of the European Monetary System (EMS) on a number of macroeconomic variables, such as exchange rates, money, interest rates and prices for member countries participating in the Exchange Rate Mechanism (ERM). We examine the instability in terms of multiple structural breaks in the variance of the series. To that end, we employ two procedures: the OLS-based tests to detect multiple structural breaks, proposed by Bai and Perron (1998, 2003) and several procedures based on Information Criterion joint with the so called sequential procedure suggested by Bai and Perron (2003). Results indicate that there is some evidence of structural breaks in volatility across investigated variables, playing the realignments in the ERM a significant role in the reduction of volatility in some countries and sub-periods. In this sense, the results tend to support the hypothesis that the EMS has contributed to reduce the macroeconomic volatility of the member countries.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.centrodeestudiosandaluces.info/PDFS/E200606.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2006/06.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 30 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:cea:doctra:e2006_06

Contact details of provider:
Postal: c/ Bailén 50. 41001 Sevilla
Phone: (34) 955 055 210
Fax: (34) 955 055 211
Email:
Web page: http://www.centrodeestudiosandaluces.es
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Teresa Rodríguez).

Related research
Keywords: European Monetary System multiple structural breaks volatility

Other versions of this item:

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
F31 - International Economics - - International Finance - - - Foreign Exchange
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michael Y. Hu & Christine X. Jiang & Christos Tsoukalas, 2004. "The volatility impact of the European monetary system on member and non-member currencies," Applied Financial Economics, Taylor and Francis Journals, vol. 14(5), pages 313-325, March. [Downloadable!] (restricted)
  2. Sarno, Lucio, 1997. "Exchange Rate and Interest Rate Volatility in the European Monetary System: Some Further Results," Applied Financial Economics, Taylor and Francis Journals, vol. 7(3), pages 255-63, June. [Downloadable!] (restricted)
  3. Marston, Richard C., 1985. "Stabilization policies in open economies," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 17, pages 859-916 Elsevier. [Downloadable!] (restricted)
  4. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Bollerslev, Tim, 1990. "Modelling the Coherence in Short-run Nominal Exchange Rates: A Multivariate Generalized ARCH Model," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 498-505, August. [Downloadable!] (restricted)
  6. Francisco Ledesma-Rodríguez & Manuel Navarro-Ibáñez & Jorge Pérez-Rodríguez & Simón Sosvilla-Rivero, 2005. "Assessing the credibility of a target zone: evidence from the EMS," Applied Economics, Taylor and Francis Journals, vol. 37(19), pages 2265-2287, October. [Downloadable!] (restricted)
    Other versions:
  7. Michael B. Devereux & Charles Engel, 1998. "Fixed vs. Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange-Rate Regime," NBER Working Papers 6867, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November. [Downloadable!] (restricted)
    Other versions:
  9. Hu, Michael Y. & Jiang, Christine X. & Tsoukalas, Christos, 1997. "The European exchange rates before and after the establishment of the European Monetary System," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 7(3), pages 235-253, October. [Downloadable!] (restricted)
  10. Richard C. Marston, 1985. "Stabilization Policies in Open Economies," NBER Working Papers 1117, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January. [Downloadable!] (restricted)
  12. Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August. [Downloadable!] (restricted)
    Other versions:
  13. Berger, Helge & Sturm, Jan-Egbert & Haan, Jakob de, 2000. "An Empirical Investigation into Exchange Rate Regime Choice and Exchange Rate Volatility," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  14. Juan Ayuso Huertas, 1995. "Is there a Trade-Off Between Exchange Rate Risk and Interest Rate Risk?," Banco de España Working Papers 9529, Banco de España.
  15. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22. [Downloadable!]
    Other versions:
  16. Juan Ayuso Huertas, 1995. "Is there a Trade-Off Between Exchange Rate Risk and Interest Rate Risk?," Banco de España Working Papers 9529, Banco de España.
  17. Hansen, Bruce E, 1997. "Approximate Asymptotic P Values for Structural-Change Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 60-67, January.
    Other versions:
  18. Frenkel, Jacob A & Mussa, Michael L, 1980. "The Efficiency of Foreign Exchange Markets and Measures of Turbulence," American Economic Review, American Economic Association, vol. 70(2), pages 374-81, May. [Downloadable!] (restricted)
  19. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    Other versions:
  20. Baxter, M. & Stockman, A.C., 1988. "Business Cycles And The Exchange Rate System: Some International Evidence," RCER Working Papers 140, University of Rochester - Center for Economic Research (RCER).
    Other versions:
  21. Sosvilla-Rivero, Simon & Fernandez-Rodriguez, Fernando & Bajo-Rubio, Oscar, 1999. "Exchange Rate Volatility in the EMS before and after the Fall," Applied Economics Letters, Taylor and Francis Journals, vol. 6(11), pages 717-22, November. [Downloadable!] (restricted)
  22. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? RePEc data is maintained by each archive holder on its own website. Nothing is held centrally.

This page was last updated on 2008-10-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.