Assessing Target Zone Credibility; Mean Reversion and Devaluation Expectations in the EMS
The paper presents estimates of devaluation expectations for six EMS currencies relative to the Deutsche mark, for the period March 1979-May 1990. The estimation method is simple and operational, and consistently generates sensible results. The estimates are constructed by the adjusting interest rate differentials by subtracting estimated expected rates of depreciation within the exchange rate band. The adjustment is nontrivial because exchange rates within the ERM bands display mean reversion rather than random walk (unit root) behavior. The adjustment is essential since the expected rates of depreciation are usually of about the same magnitude as the interest rate differentials.
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.
| Length: | 35 |
| Date of creation: | 01 Oct 1991 |
| Handle: | RePEc:imf:imfwpa:91/96 |
| Contact details of provider: | Postal: International Monetary Fund, Washington, DC USA Phone: (202) 623-7000 Fax: (202) 623-4661 Web page: http://www.imf.org/external/pubind.htm Email: More information through EDIRC
|
| Order Information: | Web: http://www.imf.org/external/pubs/pubs/ord_info.htm |
No references listed on IDEAS
You can help add them by filling out this form.