Estimating Exchange Rate Dynamics with Diffusion Processes : An Application to Greek EMU Data
AbstractRecently various exchange rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. Technically, these stochastic equilibrium models are diffusion processes which have to be estimated by discretely sampled observations. Using daily exchange rate data prior to the Greek EMU-entrance in January 2001 this paper develops a rigorous estimation procedure. The estimates provide statistical evidence of increased central bank intervention activities in the run-up to the Greek EMU entrance. Thus the modelling and estimation framework establishes an approach for detecting intervention phases in the absence of concrete intervention data. --
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Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 267.
Date of creation: 2004
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Diffusion processes; estimation; exchange rates; EMU; central bank interventions;
Other versions of this item:
- Mark Trede & Bernd Wilfling, 2007. "Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data," Empirical Economics, Springer, vol. 33(1), pages 23-39, July.
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
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