Foreign Exchange and Money Markets in the Context of the Exchange Rate Target Zone
The paper has assessed market participants' confidence in the national currency of Latvia in the period between January 2001 and April 2003 using as the basis the position of the lats interest rates within the interest rate corridor. For the purpose of the study, the method of Lars E. O. Svensson was modified taking into account quoted interest rates and exchange rates as well as using the simple interest rate calculation. For the term of up to 1 year, arbitrage opportunities in Latvia's foreign exchange and money markets, likely to arise from the absence of money market participants' confidence in the existing foreign exchange corridor, have not been observed. The assessment of Latvia's money market participants does not signal any realignment possibility for the foreign exchange regime within the coming year.
|Date of creation:||17 Aug 2004|
|Date of revision:|
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- Lars E.O. Svensson, 1990.
"The Simplest Test of Target Zone Credibility,"
NBER Working Papers
3394, National Bureau of Economic Research, Inc.
- Garber, Peter M. & Svensson, Lars E.O., 1995.
"The operation and collapse of fixed exchange rate regimes,"
Handbook of International Economics,
in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 36, pages 1865-1911
- Peter M. Garber & Lars E.O. Svensson, 1994. "The Operation and Collapse of Fixed Exchange Rate Regimes," NBER Working Papers 4971, National Bureau of Economic Research, Inc.
- Garber, P.M. & Svensson, L.E.O., 1994. "The Operation and Collapse of Fixed Exchange Rate Regimes," Papers 588, Stockholm - International Economic Studies.
- Donald J Mathieson & Robert P Flood & Andrew K. Rose, 1991.
"An Empirical Exploration of Exchange Rate Target-Zones,"
IMF Working Papers
91/15, International Monetary Fund.
- Flood, Robert P. & Rose, Andrew K. & Mathieson, Donald J., 1991. "An empirical exploration of exchange-rate target-zones," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 7-65, January.
- Robert P. Flood & Andrew K. Rose & Donald J. Mathieson, 1990. "An Empirical Exploration of Exchange Rate Target-Zones," NBER Working Papers 3543, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 669-682.
- Lars E.O. Svensson, 1991.
"Assessing Target Zone Credibility: Mean Reversion and Devaluation Expectations in the ERM 1979-1992,"
NBER Working Papers
3795, National Bureau of Economic Research, Inc.
- Svensson, Lars E. O., 1993. "Assessing target zone credibility : Mean reversion and devaluation expectations in the ERM, 1979-1992," European Economic Review, Elsevier, vol. 37(4), pages 763-793, May.
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