Regimen changes and duration in the European Monetary System
This paper examines the regime changes in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS), applying the duration model approach to weekly data of eight currencies participating in the ERM, covering the complete EMS history. When using the non-parametric (univariate) analysis, we found that for those regimens with long durations, the ERM would have been relatively stable, while for the (more common) regimes associated with short durations would have been more unstable. The probability of maintaining a certain regime is estimated to be 0.685. When applying a parametric (multivariate) analysis to investigate the role of other variables in the probability of a regime change, we conclude that the interest rate differential with Germany and the magnitude of the realignment would have negatively affected the duration of a given regime, while credibility would have positively influenced such duration. Finally, when distinguishing between groups of currencies, we observe that those in the core are more stable than those in the periphery, obtaining evidence against equality of survival functions among these groups of currencies.
|Date of creation:||Dec 2002|
|Date of revision:|
|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.:
- Fernandez-Rodriguez, Fernando & Sosvilla-Rivero, Simon & Andrada-Felix, Julian, 1999.
"Exchange-rate forecasts with simultaneous nearest-neighbour methods: evidence from the EMS,"
International Journal of Forecasting,
Elsevier, vol. 15(4), pages 383-392, October.
- Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & Julián Andrada, . "Exchange-rate forecasts with simultaneous nearest-neighbour methods: Evidence from the EMS," Working Papers 98-17, FEDEA.
- Edin, Per-Anders & Vredin, Anders, 1993.
"Devaluation Risk in Target Zones: Evidence from the Nordic Countries,"
Royal Economic Society, vol. 103(416), pages 161-75, January.
- Edin, P.A. & Vredin, A., 1991. "Devaluation Risk in Target Zones: Evidence from the Nordic Countries," Papers 1991g, Uppsala - Working Paper Series.
- Simon Sosvilla-Rivero & Fernando Fernandez-Rodriguez & Oscar Bajo-Rubio, 1999. "Exchange rate volatility in the EMS before and after the fall," Applied Economics Letters, Taylor & Francis Journals, vol. 6(11), pages 717-722.
- Krugman, Paul R, 1991.
"Target Zones and Exchange Rate Dynamics,"
The Quarterly Journal of Economics,
MIT Press, vol. 106(3), pages 669-82, August.
- Bryon Higgins, 1993. "Was the ERM crisis inevitable?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 27-40.
- Svensson, L.E.O., 1990.
"The Simplest Test of Target Zone Credibility,"
469, Stockholm - International Economic Studies.
- Ozkan, F Gulcin & Sutherland, Alan, 1995. "Policy Measures to Avoid a Currency Crisis," Economic Journal, Royal Economic Society, vol. 105(429), pages 510-19, March.
- Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
- Lars E. O. Svensson, 1992. "An Interpretation of Recent Research on Exchange Rate Target Zones," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 119-144, Fall.
- Weber, A., 1991. "EMS Credibility," Discussion Paper 1991-3, Tilburg University, Center for Economic Research.
- Oscar Bajo-Rubio & Simón Sosvilla-Rivero & Fernado Fernández-Rodríguez, .
"Asymmetry in the EMS: New evidence based on non-linear forecasts,"
- Bajo-Rubio, Oscar & Sosvilla-Rivero, Simon & Fernandez-Rodriguez, Fernando, 2001. "Asymmetry in the EMS: New evidence based on non-linear forecasts," European Economic Review, Elsevier, vol. 45(3), pages 451-473, March.
- Óscar Bajo Rubio & Simón Sosvilla Rivero & Fernando Fernández Rodríguez, 2000. "Asymmetry In The Ems: New Evidence Based On Non-Linear Forecasts," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0001, Departamento de Economía - Universidad Pública de Navarra.
- F. FernAndez-RodrIguez & S. Sosvilla-Rivero & J. Andrada-FElix, 2003. "Technical analysis in foreign exchange markets: evidence from the EMS," Applied Financial Economics, Taylor & Francis Journals, vol. 13(2), pages 113-122.
- De Grauwe, Paul & Dewachter, Hans & Veestraeten, Dirk, 1999. "Explaining Recent European Exchange-Rate Stability," International Finance, Wiley Blackwell, vol. 2(1), pages 1-31, April.
- Fernando Fernández-Rodríguez & Simón Sosvilla-Rivero & J. Martín-González., . "Credibility in the EMS: New evidence using nonlinear forecastability tests," Working Papers 97-14, FEDEA.
- Weber, A.A., 1991. "EMS Credibility," Papers 9103, Tilburg - Center for Economic Research.
- Bertola, Giuseppe & Caballero, Ricardo J, 1992.
"Target Zones and Realignments,"
American Economic Review,
American Economic Association, vol. 82(3), pages 520-36, June.
When requesting a correction, please mention this item's handle: RePEc:aee:wpaper:0205. 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 references are entirely missing, you can add them using this form.