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Testing for Convergence: the Punt-Sterling Relationship in the Context of the EMS


  • Macho, J.F.
  • Castro, M.J.R.


This work seeks to analyze the stability of the exchange rate between the Irish and Sterling pounds. Towards this end, we work on a procedure, previously suggested by Haldane & Hall (1991), based on a regression with changing parameters and propose a statistical test of the null hypothesis of non-convergence versus the 'tendency towards convergence' alternative. The interest of the application rests in the fact that Ireland and the United Kingdom represent two countries that have traditionally maintained very strong commercial relationships, which forces them to maintain a very stable exchange rate in practice.

Suggested Citation

  • Macho, J.F. & Castro, M.J.R., 1997. "Testing for Convergence: the Punt-Sterling Relationship in the Context of the EMS," ASSET - Instituto De Economia Publica 164, ASSET (Association of Southern European Economic Theorists).
  • Handle: RePEc:fth:inecpu:164

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    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • F31 - International Economics - - International Finance - - - Foreign Exchange


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