Explaining Devaluation Expectations in the EMS
This paper is an attempt to explain devaluation expectations in the ERM with macroeconomic fundamentals. Two different measures of devaluation expectations are used; expectations estimated using the drift-adjustment method of Bertola and Svensson  and the directly observable interest rate differential. The interest rate differential seems more closely connected to macroeconomic fundamentals than the estimates stemming from the drift- adjustment metod. For the ERM as a whole, an expanded theoretic model of exchange rate determination explains a considerable part of the devaluation expectations, whereas for individual countries additional variables are important, and the relationships are ambiguous and country specific.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jun 1994|
|Date of revision:|
|Publication status:||Published in Finnish Economic Papers, 1995, pages 63-81|
|Contact details of provider:|| Postal: |
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
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.:
- Lars E.O. Svensson, 1990.
"The Simplest Test of Target Zone Credibility,"
NBER Working Papers
3394, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1988.
"Target Zones and Exchange Rate Dynamics,"
NBER Working Papers
2481, National Bureau of Economic Research, Inc.
- Zhaohui Chen & Alberto Giovannini, 1992. "Estimating Expected Exchange Rates Under Target Zones," NBER Working Papers 3955, National Bureau of Economic Research, Inc.
- Vincent Koen, 1991. "Testing the Credibility of the Belgian Hard Currency Policy," IMF Working Papers 91/79, International Monetary Fund.
- Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
When requesting a correction, please mention this item's handle: RePEc:hhs:hastef:0020. 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: (Helena Lundin)
If references are entirely missing, you can add them using this form.