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Mean Reversion in EMS Exchange Rates

  • Bruce Mizrach

    ()

    (Rutgers University)

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    Time series evidence on exchange rates has been unable to reject the random walk hypothesis. A simple structural model that accounts for target zone nonlinearities provides conclusive evidence of mean reversion in EMS exchange rates.

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    File URL: ftp://snde.rutgers.edu/Rutgers/wp/1995-25.pdf
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    Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199525.

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    Date of creation: 03 Jul 1996
    Date of revision:
    Publication status: Published in Brussels Economic Review, forthcoming.
    Handle: RePEc:rut:rutres:199525
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    1. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    2. Engel, Charles & Hamilton, James D, 1990. "Long Swings in the Dollar: Are They in the Data and Do Markets Know It?," American Economic Review, American Economic Association, vol. 80(4), pages 689-713, September.
    3. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    4. Meese, Richard A & Rose, Andrew K, 1990. "Nonlinear, Nonparametric, Nonessential Exchange Rate Estimation," American Economic Review, American Economic Association, vol. 80(2), pages 192-96, May.
    5. Bruce Mizrach, 1993. "Target zone models with stochastic realignments: an econometric evaluation," Research Paper 9302, Federal Reserve Bank of New York.
    6. Mizrach, B, 1992. "Multivariate Nearest-Neighbor Forecasts of EMS Exchange Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S151-63, Suppl. De.
    7. Paul R. Krugman, 1988. "Target Zones and Exchange Rate Dynamics," NBER Working Papers 2481, National Bureau of Economic Research, Inc.
    8. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
    9. Meese, Richard A & Rose, Andrew K, 1991. "An Empirical Assessment of Non-linearities in Models of Exchange Rate Determination," Review of Economic Studies, Wiley Blackwell, vol. 58(3), pages 603-19, May.
    10. Froot, Kenneth A & Thaler, Richard H, 1990. "Foreign Exchange," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 179-92, Summer.
    11. Diebold, Francis X. & Nason, James A., 1990. "Nonparametric exchange rate prediction?," Journal of International Economics, Elsevier, vol. 28(3-4), pages 315-332, May.
    12. Bruce Mizrach, 1993. "Mean reversion in EMS exchange rates," Research Paper 9301, Federal Reserve Bank of New York.
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