IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Crises and Credibility in a Target Zone: A Logit from a Markov-Switching Model

  • M. Isabel Campos

    (University of Valladolid)

  • M. Araceli Rodríguez

    (University of Valladolid)

The 90’s could be characterized as a time in which both developed and emerging countries have su¤ered important episodes of exchange rate instability; some of these periods have resulted in exchange rate devaluations and others, in important exchange rate depreciations. We are interested in the knowledge and explanation of such moments of turbulence in order to avoid or even forecast future crises. This paper focuses on the study of the di¤erent moments of speculative pressure in Europe and particularly on the Spanish peseta during the target zone period. We use a Binary Dependent Variable Model (Logit Method) to estimate the readjustment probability in a target zone. Our dependent variable is calculated from a Markov-Switching model on the Spanish-German interest rate di¤erential. We show that this methodology is appropriate.

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://www.aeefi.com/RePEc/pdf/defi00-05.pdf
Download Restriction: no

Paper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 00-05.

as
in new window

Length: 21 pages
Date of creation: Sep 2000
Date of revision:
Handle: RePEc:aee:wpaper:0005
Contact details of provider: Web page: http://www.aeefi.com
More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Svensson, Lars E O, 1991. "The Simplest Test of Target Zone Credibility," CEPR Discussion Papers 493, C.E.P.R. Discussion Papers.
  2. Giuseppe Bertola & Lars E.O. Svensson, 1991. "Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models," NBER Working Papers 3576, National Bureau of Economic Research, Inc.
  3. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
  4. Paul Soderlind & Lars E. O. Svensson, 1997. "New Techniques to Extract Market Expectations from Financial Instruments," NBER Working Papers 5877, National Bureau of Economic Research, Inc.
  5. Bruce Mizrach, 1993. "Target zone models with stochastic realignments: an econometric evaluation," Research Paper 9302, Federal Reserve Bank of New York.
  6. Gomez-Puig, Marta & Montalvo, JoseG., 1997. "A new indicator to assess the credibility of the EMS," European Economic Review, Elsevier, vol. 41(8), pages 1511-1535, August.
  7. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
  8. Tronzano, Marco & Psaradakis, Zacharias & Sola, Martin, 2003. "Target zone credibility and economic fundamentals," Economic Modelling, Elsevier, vol. 20(4), pages 791-807, July.
  9. Kruger, Mark & Osakwe, Patrick N. & Page, Jennifer, 1998. "Fundamentals, Contagion and Currency Crises: An Empirical Analysis," Working Papers 98-10, Bank of Canada.
  10. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
  11. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  12. Juan Ayuso & Maria Perez-Jurado, 1997. "Devaluations and depreciation expectations in the EMS," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 471-484.
  13. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1994. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," CEPR Discussion Papers 1060, C.E.P.R. Discussion Papers.
  14. Bekaert, Geert & Gray, Stephen F., 1998. "Target zones and exchange rates:: An empirical investigation," Journal of International Economics, Elsevier, vol. 45(1), pages 1-35, June.
  15. Edin, Per-Anders & Vredin, Anders, 1993. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Economic Journal, Royal Economic Society, vol. 103(416), pages 161-75, January.
  16. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
  17. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:aee:wpaper:0005. 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: (Jose L. Torres)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.