Advanced Search
MyIDEAS: Login to save this paper or follow this series

Central bank intervenyion under target zones: the portuguese escudo in the ERM

Contents:

Author Info

  • Macedo, Jorge Braga de
  • Nunes, Luis Catela
  • Pereira, Luis Brites

Abstract

For Portugal, the transition to the Euro began in September 1989 and featured three successive institutional arrangements related to the Exchange Rate Mechanism of the European Monetary System: shadowing it, belonging to it with 6% and then with 15% fluctuation bands. Using daily data, we study how the degree of mean reversion of the exchange rate and central bank intervention reflect the change in economic regime towards stability and convertibility. Our Markov regime-switching framework with an EGARCH specification allows for deviations from central party and intervention to affect the mean, the conditional variance and the state transition probabilities in the different policy regimes. Mean reversion is significant even when volatility is high in ERM-6, unlike central bank intervention, which almost disappears in ERM_15. Intervention affects the mean and the variance of the exchange rate when volatility is low, and the variance in ERM-S, even when volatility is high.

Download Info

If 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.
File URL: http://fesrvsd.fe.unl.pt/WPFEUNL/WP2003/wp435.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp435.

as in new window
Length: 43 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unl:unlfep:wp435

Contact details of provider:
Postal: Campus de Campolide, 1099-032 Lisboa
Phone: (351) 21 3801638
Fax: (351) 21 3870933
Email:
Web page: http://www.fe.unl.pt
More information through EDIRC

Related research

Keywords: Central bank intervention; target zones; exchange rate mechanism; regime-switching;

Find related papers by JEL classification:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Macedo, Jorge Braga de, 2007. "A mudança do regime cambial português: Um balanço 15 anos depois de Maastricht," FEUNL Working Paper Series, Universidade Nova de Lisboa, Faculdade de Economia wp502, Universidade Nova de Lisboa, Faculdade de Economia.
  2. Jorge Braga de Macedo & Luis Pereira & Afonso Reis, 2009. "Comparing Exchange Market Pressure across Five African Countries," Open Economies Review, Springer, Springer, vol. 20(5), pages 645-682, November.
  3. Bernardino Adão & Joaquim Pina, 2003. "The Portuguese Escudo in the ERM and the Efectiveness of the Exchange Rate Management," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.
  4. Lopes, José Mário & Nunes, Luis C., 2012. "A Markov regime switching model of crises and contagion: The case of the Iberian countries in the EMS," Journal of Macroeconomics, Elsevier, Elsevier, vol. 34(4), pages 1141-1153.
  5. Macedo, Jorge Braga de & Braz, José & Pereira, Luis brites & Nunes, Luis C., 2006. "Exchange market pressure and the credibility of Macau's currency Board," FEUNL Working Paper Series, Universidade Nova de Lisboa, Faculdade de Economia wp492, Universidade Nova de Lisboa, Faculdade de Economia.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:unl:unlfep:wp435. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sean Story).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.