Assessing Target Zone Credibility
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Assessing Target Zone Credibility
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Author : Mr.Lars E. O. Svensson
language : en
Publisher: International Monetary Fund
Release Date : 1991-10-01
Assessing Target Zone Credibility written by Mr.Lars E. O. Svensson and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991-10-01 with Business & Economics categories.
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.
On The Credibility Issue Of Exchange Rate Target Zones
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Author : Matthias Rau-Göhring
language : en
Publisher: diplom.de
Release Date : 2003-04-29
On The Credibility Issue Of Exchange Rate Target Zones written by Matthias Rau-Göhring and has been published by diplom.de this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003-04-29 with Business & Economics categories.
Inhaltsangabe:Zusammenfassung: Währungskrisen, wie die des Europäischen Währungssystems (EWS) 1992, können noch immer nur unzureichend vorausgesagt werden. Es wird jedoch anerkannt, dass die Glaubwürdigkeit eines jeden Währungssystems ausschließlich endogen bestimmt wird, d.h. durch Interaktion der einzelnen Akteure an den Wechselkursmärkten. Die vorliegende Arbeit untersucht, ob ein bestimmtes Glaubwürdigkeitsmaß, eingeführt von Avesani, Gallo und Salmon (1995), geeignet ist, die große EWS Krise 1992 vorauszusagen. Dabei handelt es sich um ein dynamisches Spiel, in dem die beiden Akteure (Zentralbank und Finanzmarkt) miteinander interagieren und damit die Glaubwürdigkeit des Systems aushandeln . Es wird gezeigt, dass o.g. Glaubwürdigkeitsmaß ein geeigneter Indikator für Währungskrisen darstellt, was empirisch anhand des französischen Francs, der italienischen Lira und des niederländischen Guldens nachgewiesen wird. Introduction: The objective of the present study is to present the literature of exchange rate target zones and to explore empirically the Avesani-Gallo-Salmon credibility measure for selected currencies belonging to the Exchange-Rate Mechanism (ERM) of the European Monetary System (EMS). In the past decade the empirical literature on real world target zones mushroomed considerably, but still, its overall significance in explaining strains in the relevant foreign exchange markets remains relatively low. In this context, I will explore whether the Avesani-Gallo-Salmon (1995) credibility measure demonstrates more power than earlier studies in the analysis of the 1992/3 EMS crisis. It is not my intention to pursue a normative analysis whether flexible or fixed exchange rates or intermediate regimes are superior to one another in terms of their economic implications. This question is beyond the scope of my analysis.1 Given that target zones are applied frequently in the real world, I purely want to figure out, whether their application is sensible on grounds of a firm commitment of the policy-makers. Exchange rate bands have been discussed widely after the breakdown of the Bretton Woods System in 1973. Although experiences with the fixed exchange rate regime were disappointing in the 1960s, increased volatility and/or overshooting of the exchange rates in the 1970s let economists doubt the famous argument by Friedman (1953) that speculation would stabilize exchange rate movements in the floating system. McKinnon (1976) reckoned that [...]
Target Zones And Realignment Expectations
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Author : Alejandro M. Werner
language : en
Publisher: International Monetary Fund
Release Date : 1995-11-01
Target Zones And Realignment Expectations written by Alejandro M. Werner and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995-11-01 with Business & Economics categories.
This paper studies the Mexican and Israeli experience with a target zone. The first part of the paper develops a model of exchange rate determination under a target zone regime with stochastic realignments, and examines the conditions under which the adoption of the target zone, instead of a fixed exchange rate, reduces the volatility of the interest rate differential. We conclude that if the variance of the expected realignment is sufficiently large, then the target zone will be useful. The second part of the paper is an empirical study that shows that the target zone regime helped reduce interest rate variability in Israel and Mexico by absorbing part of the shocks to the expected realignment with movements of the exchange rate inside the band.
Arbitrage Based Tests Of Target Zone Credibility
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Author : José Campa
language : en
Publisher:
Release Date : 1995
Arbitrage Based Tests Of Target Zone Credibility written by José Campa and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Foreign exchange futures categories.
The Credibility And Performance Of Unilateral Target Zones
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Author : Raúl Aníbal Feliz
language : en
Publisher:
Release Date : 1993
The Credibility And Performance Of Unilateral Target Zones written by Raúl Aníbal Feliz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Foreign exchange administration categories.
Handbook Of International Economics
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Author : G.M. Grossman
language : en
Publisher: Elsevier
Release Date : 1997-10-24
Handbook Of International Economics written by G.M. Grossman and has been published by Elsevier this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-10-24 with Business & Economics categories.
Handbook of International Economics
Expected Devaluation And Economic Fundamentals
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Author : Mr.Alun H. Thomas
language : en
Publisher: International Monetary Fund
Release Date : 1993-11-01
Expected Devaluation And Economic Fundamentals written by Mr.Alun H. Thomas and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993-11-01 with Business & Economics categories.
Recent incidents of exchange rate collapse have provoked interest in the extent to which such events are determined by economic fundamentals. This paper considers whether interest rate differentials are appropriate measures of the risk of devaluation and whether this measure of devaluation risk reflects the movements of variables which capture internal and external balance. The paper finds that interest rate differentials reflect devaluation risk but that movements in fundamental variables have only a weak effect on devaluation risk in France and Italy. The most significant influence on devaluation risk is the position of the currency in its band in that the lower is the exchange value of a currency within the band, the greater is the perceived risk of devaluation.
Evaluating The Ems And Emu Using Stochastic Simulations
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Author : Mr.Paul R. Masson
language : en
Publisher: International Monetary Fund
Release Date : 1993-03-01
Evaluating The Ems And Emu Using Stochastic Simulations written by Mr.Paul R. Masson and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993-03-01 with Business & Economics categories.
Evaluations of European monetary integration using model simulations have given conflicting results, and the paper attempts to elucidate the reasons for the differences. Several features stand out: how to model realignments; how monetary policy is set for individual countries or for Europe; and how large are risk premium shocks in exchange markets. We quantify the effects of different assumptions relating to these features using MULTIMOD.
Adjustment And Growth In The European Monetary Union
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Author : Francisco Torres
language : en
Publisher: Cambridge University Press
Release Date : 1993-10-21
Adjustment And Growth In The European Monetary Union written by Francisco Torres and has been published by Cambridge University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993-10-21 with Business & Economics categories.
The Maastricht Treaty, signed in December 1991, set a timetable for the European Community's economic and monetary union (EMU) and clearly defined the institutional policy changes necessary for its achievement. Subsequent developments have demonstrated, however, the importance of many key issues in the transition to EMU that were largely neglected at the time. This volume reports the proceedings of a joint CEPR conference with the Banco de Portugal, held in January 1992. In these papers, leading international experts address the instability of the transition to EMU, the long-run implications of monetary union and the single market for growth and convergence in Europe. They also consider the prospects for inflation and fiscal convergence, regional policy and the integration of financial markets and fiscal systems. Attention focuses on adjustment mechanisms with differentiated shocks, region-specific business cycles and excessive industrial concentration and the cases for a two-speed EMU and fiscal federalism.
Understanding Interdependence
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Author : Peter B. Kenen
language : en
Publisher: Princeton University Press
Release Date : 2021-06-08
Understanding Interdependence written by Peter B. Kenen and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-06-08 with Business & Economics categories.
Drawing together new papers by some of today's leading figures in international economics and finance, Understanding Interdependence surveys the current state of knowledge on the international monetary system and, by implication, defines the research horizon for the future. Covering topics including the behavior of exchange rates, the choice of exchange-rate regime, current-account adjustment in classical and Keynesian models, the extent and effects of capital mobility, international debt, the stabilization and reform of the formerly planned economies, European monetary union, and international policy coordination, the book underscores the importance of these subjects and identifies lessons for policymakers. The contributors to the volume are Michael Bruno, Ralph C. Bryant, Richard N. Cooper, Michael P. Dooley, Barry Eichengreen, Stanley Fischer, Charles A. E. Goodhart, Peter Hooper, Peter B. Kenen, Paul R. Krugman, Henri Lorie, Jaime Marquez, Ronald I. McKinnon, Michael Mussa, Maurice Obstfeld, John Odling-Smee, Assaf Razin, Dani Rodrik, Mark P. Taylor, and John Williamson.