Foreign Exchange and Money Markets in the Context of the Exchange Rate Target Zone
AbstractThe paper has assessed market participants' confidence in the national currency of Latvia in the period between January 2001 and April 2003 using as the basis the position of the lats interest rates within the interest rate corridor. For the purpose of the study, the method of Lars E. O. Svensson was modified taking into account quoted interest rates and exchange rates as well as using the simple interest rate calculation. For the term of up to 1 year, arbitrage opportunities in Latvia's foreign exchange and money markets, likely to arise from the absence of money market participants' confidence in the existing foreign exchange corridor, have not been observed. The assessment of Latvia's money market participants does not signal any realignment possibility for the foreign exchange regime within the coming year.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Latvijas Banka in its series Working Papers with number 2004/01.
Date of creation: 17 Aug 2004
Date of revision:
exchange rate target zone; credibility; market interest rate; arbitrage opportunities;
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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.:
- Svensson, L.E.O., 1990.
"The Simplest Test of Target Zone Credibility,"
469, Stockholm - International Economic Studies.
- Donald J. Mathieson & Robert P. Flood & Andrew K. Rose, 1991.
"An Empirical Exploration of Exchange Rate Target-Zones,"
IMF Working Papers
91/15, International Monetary Fund.
- Flood, Robert P. & Rose, Andrew K. & Mathieson, Donald J., 1991. "An empirical exploration of exchange-rate target-zones," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 7-65, January.
- Robert P. Flood & Andrew K. Rose & Donald J. Mathieson, 1990. "An Empirical Exploration of Exchange Rate Target-Zones," NBER Working Papers 3543, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1988.
"Target Zones and Exchange Rate Dynamics,"
NBER Working Papers
2481, National Bureau of Economic Research, Inc.
- Svensson, Lars E. O., 1993.
"Assessing target zone credibility : Mean reversion and devaluation expectations in the ERM, 1979-1992,"
European Economic Review,
Elsevier, vol. 37(4), pages 763-793, May.
- Lars E.O. Svensson, 1994. "Assessing Target Zone Credibility: Mean Reversion and Devaluation Expectations in the ERM 1979-1992," NBER Working Papers 3795, National Bureau of Economic Research, Inc.
- Garber, P.M. & Svensson, L.E.O., 1994.
"The Operation and Collapse of Fixed Exchange Rate Regimes,"
588, Stockholm - International Economic Studies.
- Garber, Peter M. & Svensson, Lars E.O., 1995. "The operation and collapse of fixed exchange rate regimes," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 36, pages 1865-1911 Elsevier.
- Peter M. Garber & Lars E.O. Svensson, 1994. "The Operation and Collapse of Fixed Exchange Rate Regimes," NBER Working Papers 4971, National Bureau of Economic Research, Inc.
- Viktors Ajevskis & Armands Pogulis, 2005. "Repegging of the Lats to the Euro: Implications for the Financial Sector," Working Papers 2005/01, Latvijas Banka.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ivars Tillers).
If references are entirely missing, you can add them using this form.