Stochastic behaviour of Deutsche mark exchange rates within EMS
This article explores the intertemporal interaction of three European Monetary System (EMS) exchange rates namely, the French franc, the Belgian franc, and the Italian lira vis-a-vis the Deutsche mark from 1979 to 1999. The returns were examined using the multivariate moving average Exponential GARCH model, which is capable of accounting for potential asymmetries in the volatility transmission mechanism. The results point to significant and reciprocal volatility spillovers among markets before Germany's reunification in 1990. However, absence of spillovers and/or asymmetric behaviour of volatility is shown in the post-unification period. The 1990s witnessed a rapid process of macroeconomic convergence by the core EMS members and these actions substantially enhanced confidence about full monetary integration. Put differently, the EMS countries became better attuned to the business cycle and managed to significantly reduce consequential asymmetric shocks and thus exchange rate volatility.
Volume (Year): 13 (2003)
Issue (Month): 9 ()
|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.:
- Ball, Clifford A. & Torous, Walter N., 1983. "A Simplified Jump Process for Common Stock Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(01), pages 53-65, March.
- Artus, P. & Avouyi-Dovi, S. & Bleuze, E. & Lecointe, F., 1991. "Transmission of U.S. monetary policy to Europe and asymmetry in the European monetary system," European Economic Review, Elsevier, vol. 35(7), pages 1369-1384, October.
- Vlaar, Peter J G & Palm, Franz C, 1993. "The Message in Weekly Exchange Rates in the European Monetary System: Mean Reversion, Conditional Heteroscedasticity, and Jumps," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 351-60, July.
- Buiter, W.H. & Corsetti, G. & Roubini, N., 1992.
"Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht,"
674, Yale - Economic Growth Center.
- Buiter, Willem H. & Corsetti, Giancarlo & Roubini, Nouriel, 1992. "`Excessive Deficits': Sense and Nonsense in the Treaty of Maastricht," CEPR Discussion Papers 750, C.E.P.R. Discussion Papers.
- R Macdonald & M P Taylor, .
"Exchange Rates, Policy Convergence And The European Monetary System,"
Dundee Discussion Papers in Economics
020, Economic Studies, University of Dundee.
- MacDonald, Ronald & Taylor, Mark P, 1991. "Exchange Rates, Policy Convergence, and the European Monetary System," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 553-58, August.
- MacDonald, Ronald & Taylor, Mark P, 1990. "Exchange Rates, Policy Convergence and the European Monetary System," CEPR Discussion Papers 444, C.E.P.R. Discussion Papers.
- Giavazzi, Francesco & Pagano, Marco, 1988.
"The advantage of tying one's hands : EMS discipline and Central Bank credibility,"
European Economic Review,
Elsevier, vol. 32(5), pages 1055-1075, June.
- Francesco Giavazzi & Marco Pagano, 1991. "The Advantage of Tying One's Hands: EMS Discipline and Central Bank Credibility," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 303-330 National Bureau of Economic Research, Inc.
- Giavazzi, Francesco & Pagano, Marco, 1986. "The Advantages of Tying One's Hands: EMS Discipline and Central Bank Credibility," CEPR Discussion Papers 135, C.E.P.R. Discussion Papers.
- Wyplosz, Charles, 1989. "Asymmetry in the EMS: Intentional or systemic?," European Economic Review, Elsevier, vol. 33(2-3), pages 310-320, March.
- Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
- Fred G M C Nieuwland & Willem F C Verschoor & Christian C P Wolff, 1990. "EMS Exchange Rates," CEPR Financial Markets Paper 0002, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
- Nikiforos Laopodis, 2001. "Time-Varying Behavior and Asymmetry in EMS Exchange Rates," International Economic Journal, Taylor & Francis Journals, vol. 15(4), pages 81-94.
- Baillie, Richard T & Bollerslev, Tim, 1989.
"The Message in Daily Exchange Rates: A Conditional-Variance Tale,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 7(3), pages 297-305, July.
- Baillie, Richard T & Bollerslev, Tim, 2002. "The Message in Daily Exchange Rates: A Conditional-Variance Tale," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 60-68, January.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Hagen, Jurgen von & Fratianni, Michele, 1990. "German dominance in the EMS: evidence from interest rates," Journal of International Money and Finance, Elsevier, vol. 9(4), pages 358-375, December.
- Cohen, Daniel & Wyplosz, Charles, 1989. "The European Monetary Union: An Agnostic Evaluation," CEPR Discussion Papers 306, C.E.P.R. Discussion Papers.
- Richard J Rogalski & Joseph D Vinso, 1977. "Price Level Variations as Predictors of Flexible Exchange Rates," Journal of International Business Studies, Palgrave Macmillan, vol. 8(1), pages 71-82, March.
- Michael J. Artis & Mark P. Taylor, 1993. "The Stabilizing Effect of the ERMon Exchange Rates and Interest Rates; An Empirical Investigation," IMF Working Papers 93/67, International Monetary Fund.
- 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.
- Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
- Herz, Bernhard & Roger, Werner, 1992. "The EMS is a greater Deutschmark area," European Economic Review, Elsevier, vol. 36(7), pages 1413-1425, October.
- Rogoff, Kenneth, 1985.
"Can exchange rate predictability be achieved without monetary convergence? : Evidence from the EMS,"
European Economic Review,
Elsevier, vol. 28(1-2), pages 93-115.
- Kenneth S. Rogoff, 1984. "Can exchange rate predictability be achieved without monetary convergence? : evidence from the EMS," International Finance Discussion Papers 245, Board of Governors of the Federal Reserve System (U.S.).
- Baillie, R.T. & Bollerslev, T., 1989. "Intra Day And Inter Market Volatility In Foreign Exchange Rates," Papers 8811, Michigan State - Econometrics and Economic Theory.
- Koutmos, Gregory & Booth, G Geoffrey, 1995. "Asymmetric volatility transmission in international stock markets," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 747-762, December.
- Charles Engel & Craig S. Hakkio, 1993. "Exchange rate regimes and volatility," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 43-58.
- Hogan, W. P. & Sharpe, I. G., 1984. "On the relationship between the New York closing spot U.S.$[+45 degree rule]$A exchange rate and the Reserve Bank of Australia's official rate," Economics Letters, Elsevier, vol. 14(1), pages 73-79.
- Susmel, Raul & Engle, Robert F., 1994. "Hourly volatility spillovers between international equity markets," Journal of International Money and Finance, Elsevier, vol. 13(1), pages 3-25, February.
When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:13:y:2003:i:9:p:665-676. 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.