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Detection of Implicit Fluctuation Bands in The European Union Countries

Author

Listed:
  • Simón Sosvilla-Rivero

    (Department of Quantitative Economics, Universidad Complutense de Madrid)

  • María del Carmen Ramos-Herrera

    (Department of Quantitative Economics, Universidad Complutense de Madrid)

Abstract

This paper attempts to identify implicit exchange rate regimes for currencies of European Union member states vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12 for twelve European countries. Our results indicate the presence of ± 2% and ± 1% implicit fluctuation bands in high percentages of the sample period even reach 100% in countries such as Bulgaria, Cyprus and Slovenia, among others. This paper provides new empirical evidence that strengthens the hypothesis of that the implemented policies differ from those announced by the monetary authorities, identifying the existence of de facto fixed monetary systems along large number of sub-periods for different currencies. It seems that the countries under study try to capture the benefits of their participation in the ERM-II moderating somewhat the potential problems arising from formal participation in the ERM-II.

Suggested Citation

  • Simón Sosvilla-Rivero & María del Carmen Ramos-Herrera, 2015. "Detection of Implicit Fluctuation Bands in The European Union Countries," Working Papers 15-09, Asociación Española de Economía y Finanzas Internacionales.
    • Handle: RePEc:aee:wpaper:1509
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange-rate regimes; Implicit fluctuation bands; Exchange rates; De facto and de iure fixed regimes;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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