Measuring convergence speed of asset prices toward a pre-announced target
This study examines asset price dynamics (i.e. the convergence speed) in the event of pre-announced conversion values and dates. The theoretical framework for these dynamics has been developed in De Grauwe et al. (1999). Two instances of conversion are examined, notably the 1879-Resumption of Specie Payments in the USA and the conversion of European currencies into the Euro on 1 January, 1999. In the econometric model the underlying fundamentals are treated as unobservable and their evolution is estimated via a Kalman filtering technique. Estimation results reveal values for the rate or speed of convergence that are in line with intuition and amount to levels well below (implicit) estimates listed in the literature.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 11 (2001)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|
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.:
- Froot, Kenneth A & Obstfeld, Maurice, 1991.
"Stochastic Process Switching: Some Simple Solutions,"
Econometric Society, vol. 59(1), pages 241-50, January.
- Kenneth A. Froot & Maurice Obstfeld, 1989. "Stochastic Process Switching: Some Simple Solutions," NBER Working Papers 2998, National Bureau of Economic Research, Inc.
- Burda, Michael & Gerlach, Stefan, 1993.
"Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate,"
Springer, vol. 18(3), pages 417-29.
- Burda, Michael C & Gerlach, Stefan, 1990. "Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate," CEPR Discussion Papers 485, C.E.P.R. Discussion Papers.
- Donald J. Mathieson & Robert P. Flood & Andrew K. Rose, 1991.
"An Empirical Exploration of Exchange Rate Target-Zones,"
IMF Working Papers
91/15, International Monetary Fund.
- Flood, Robert P. & Rose, Andrew K. & Mathieson, Donald J., 1991. "An empirical exploration of exchange-rate target-zones," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 7-65, January.
- Robert P. Flood & Andrew K. Rose & Donald J. Mathieson, 1990. "An Empirical Exploration of Exchange Rate Target-Zones," NBER Working Papers 3543, National Bureau of Economic Research, Inc.
- Froot, Kenneth & Obstfeld, Maurice, 1991.
"Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach,"
CEPR Discussion Papers
522, C.E.P.R. Discussion Papers.
- Froot, Kenneth A. & Obstfeld, Maurice, 1991. "Exchange-rate dynamics under stochastic regime shifts : A unified approach," Journal of International Economics, Elsevier, vol. 31(3-4), pages 203-229, November.
- Kenneth A. Froot & Maurice Obstfeld, 1989. "Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach," NBER Working Papers 2835, National Bureau of Economic Research, Inc.
- Smith, Gregor W, 1991. "Solution to a Problem of Stochastic Process Switching," Econometrica, Econometric Society, vol. 59(1), pages 237-39, January.
- De Grauwe, Paul & Dewachter, Hans & Veestraeten, Dirk, 1999. "Price dynamics under stochastic process switching: some extensions and an application to EMU1," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 195-224, February.
- Meese, Richard A, 1986. "Testing for Bubbles in Exchange Markets: A Case of Sparkling Rates?," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 345-73, April.
- Michael W. Klein & Karen K. Lewis, 1991.
"Learning About Intervention Target Zones,"
NBER Working Papers
3674, National Bureau of Economic Research, Inc.
- Gardeazabal, Javier & Regulez, Marta & Vazquez, Jesus, 1997. "Testing the Canonical Model of Exchange Rates with Unobservable Fundamentals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 389-404, May.
- Burmeister, Edwin & Wall, Kent D., 1982. "Kalman filtering estimation of unobserved rational expectations with an application to the German hyperinflation," Journal of Econometrics, Elsevier, vol. 20(2), pages 255-284, November.
- Robert P. Flood & Peter M. Garber, 1982.
"A model of stochastic process switching,"
International Finance Discussion Papers
201, Board of Governors of the Federal Reserve System (U.S.).
- Miller, Marcus & Sutherland, Alan, 1994. "Speculative Anticipations of Sterling's Return to Gold: Was Keynes Wrong?," Economic Journal, Royal Economic Society, vol. 104(425), pages 804-12, July.
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:11:y:2001:i:6:p:591-601. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.