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Tail Behaviour of the Euro

  • Cotter, John

This paper empirically analyses risk in the Euro relative to other currencies. Comparisons are made between a sub period encompassing the final transitional stage to full monetary union with a sub period prior to this. Stability in the face of speculative attack is examined using Extreme Value Theory to obtain estimates of tail exchange rate changes. The findings are encouraging. The Euro’s common risk measures do not deviate substantially from other currencies. Also, the Euro is stable in the face of speculative pressure. For example, the findings consistently show the Euro being less risky than the Yen, and having similar inherent risk to the Deutsche Mark, the currency that it is essentially replacing.

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File URL: http://mpra.ub.uni-muenchen.de/3531/1/MPRA_paper_3531.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3531.

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Date of creation: 2004
Date of revision: 2005
Handle: RePEc:pra:mprapa:3531
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Web page: http://mpra.ub.uni-muenchen.de

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  6. Alogoskoufis, George & Portes, Richard & Rey, Hélène, 1997. "The Emergence of the Euro as an International Currency," CEPR Discussion Papers 1741, C.E.P.R. Discussion Papers.
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  9. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Paul Labys, 1999. "Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-060, New York University, Leonard N. Stern School of Business-.
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  15. McCurdy, Thomas H & Morgan, Ieuan G, 1988. "Testing the Martingale Hypothesis in Deutsche Mark Futures with Models Specifying the Form of Heteroscedasticity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 187-202, July-Sept.
  16. Phillips, Peter C B & McFarland, James W & McMahon, Patrick C, 1996. "Robust Tests of Forward Exchange Market Efficiency with Empirical Evidence from the 1920s," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 1-22, Jan.-Feb..
  17. Fong, Wai Mun, 1998. "The Dynamics of DM/L Exchange Rate Volatility: A SWARCH Analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(1), pages 59-71, January.
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