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Mean Reversion in EMS Exchange Rates

Author

Listed:
  • Bruce Mizrach

    (Rutgers University)

Abstract

Time series evidence on exchange rates has been unable to reject the random walk hypothesis. A simple structural model that accounts for target zone nonlinearities provides conclusive evidence of mean reversion in EMS exchange rates.

Suggested Citation

  • Bruce Mizrach, 1996. "Mean Reversion in EMS Exchange Rates," Departmental Working Papers 199525, Rutgers University, Department of Economics.
    • Handle: RePEc:rut:rutres:199525
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    References listed on IDEAS

    as
    1. Mizrach, Bruce, 1995. "Target zone models with stochastic realignments: an econometric evaluation," Journal of International Money and Finance, Elsevier, vol. 14(5), pages 641-657, October.
    2. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
    3. Richard A. Meese & Andrew K. Rose, 1991. "An Empirical Assessment of Non-Linearities in Models of Exchange Rate Determination," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 603-619.
    4. Diebold, Francis X. & Nason, James A., 1990. "Nonparametric exchange rate prediction?," Journal of International Economics, Elsevier, vol. 28(3-4), pages 315-332, May.
    5. Bruce Mizrach, 1993. "Mean reversion in EMS exchange rates," Research Paper 9301, Federal Reserve Bank of New York.
    6. Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 669-682.
    7. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    8. Mizrach, B, 1992. "Multivariate Nearest-Neighbor Forecasts of EMS Exchange Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 151-163, Suppl. De.
    9. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    10. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    11. Meese, Richard A & Rose, Andrew K, 1990. "Nonlinear, Nonparametric, Nonessential Exchange Rate Estimation," American Economic Review, American Economic Association, vol. 80(2), pages 192-196, May.
    12. Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 179-192, Summer.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    EMS; target zone; unit roots;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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