Evaluating currency crises: the case of the European Monetary System
AbstractIn this paper we examine the nature of currency crises. We ascertain whether the currency crises of the European Monetary System (EMS) were based either on fundamentals, or on self-fulfilling market expectations driven by extrinsic uncertainty. In particular, we extend previous work of Jeanne and Masson (J Int Econ 50:327â350, 2000) regarding the evaluation of currency crisis. We contribute to the existing literature proposing the use of Markov regime-switching with time-varying transition probability model. Our empirical results suggest that the currency crises of the EMS were not due only to market expectations driven by external uncertainty, or âsunspotsâ, but also to fundamental variables that help to explain the behavior of market expectations. Copyright Springer-Verlag 2008
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Bibliographic InfoPaper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2003 with number 69.
Date of creation: 27 Sep 2004
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Other versions of this item:
- Andrea Cipollini & Kostas Mouratidis & Nicola Spagnolo, 2008. "Evaluating currency crises: the case of the European monetary system," Empirical Economics, Springer, vol. 35(1), pages 11-27, August.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- F31 - International Economics - - International Finance - - - Foreign Exchange
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