This paper estimates the exchange market pressure (EMP) on currencies of EU4 countries (Czech Republic, Hungary, Poland, Slovakia) during the period 1993-2005. Therefore, it is one of a very few studies focused on this region and the very first paper applying the model-dependent approach to the EMP estimation on these countries. Moreover, the model proposed by Spolander (1999) is used in the paper along with quarterly data. Thus, this paper, tests the suitability of this model for the countries analysed. Regarding the results obtained, EMP is of similar magnitude in all countries except Poland. We found that EMP was significantly lower and less volatile during the periods when a floating exchange rate arrangement was applied than in periods with fixed exchange rates. It implies that unavoidable entry into ERM II (a quasi-fixed regime) could lead to the EMP increase during the period of the exchange rate stability criterion fulfilment. Hence, a revision of the current definition and understanding of the criterion fulfilment is suggested. Since the model estimation was burdened by some factors reducing the estimates validity we also propose some modifications and extensions of the methodology applied.
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
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
1196.
Length: Date of creation: Sep 2006 Date of revision: Publication status: Published in Investment Management and Financial Innovations 3.4(2007): pp. 80-94 Handle: RePEc:pra:mprapa:1196
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.: