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The Polish crawling peg system: A cointegration analysis

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  • Trenkler, Carsten

Abstract

After a temporary period of a fixed exchange rate regime pegging the Polish zloty to the U.S. dollar, Poland established a preannounced crawling peg regime on October 15, 1991. In this system the zloty is tied to a currency basket and devalued with a preannounced monthly rate (rate of crawl). If the monetary authorities have been successful in defending the crawling peg stable long-run relationships between the Polish zloty on the one hand and the basket's value and the currencies comprising the basket on the other hand are expected to exist. I test for such long-run relationships within the cointegration framework. However, as the transition path of the Polish exchange rate was not; smooth due to discrete steep devaluations one has to apply cointegration tests taking such structural shifts into account. Using recently developed test procedures I find the postulated cointegration relations and conclude that the monetary authorities could defend the crawling peg for the sample period under study.

Suggested Citation

  • Trenkler, Carsten, 2000. "The Polish crawling peg system: A cointegration analysis," SFB 373 Discussion Papers 2000,71, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    • Handle: RePEc:zbw:sfb373:200071
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    Cited by:

    1. Carsten Trenkler*, 2005. "The Effects of Ignoring Level Shifts on Systems Cointegration Tests," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 89(3), pages 281-301, August.

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