Target Zones And Forward Rates In A Model With Repeated Realignments

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Target Zones And Forward Rates In A Model With Repeated Realignments

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Author : Mr.Leonardo Bartolini
language : en
Publisher: International Monetary Fund
Release Date : 1992-03-01

Target Zones And Forward Rates In A Model With Repeated Realignments written by Mr.Leonardo Bartolini 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 1992-03-01 with Business & Economics categories.

This paper studies the implications of the imperfect credibility of an exchange rate target zone on the term structure of forward premia. The relationship between spot and forward exchange rates of different maturities reflects the possibility of repeated realignments of the exchange rate band. The credibility of the commitment to the target zone implicit in forward market data can be extracted by estimating the model. Application to French/German data indicates that the model is capable of matching observed patterns of interest rate differentials during the EMS, while yielding estimates of the credibility parameters that accord with the experience of the FF/DM exchange rate during the 1980s.

Time Varying Devaluation Risk Interest Rate Differentials And Exchange Rates In Target Zones

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Author : Axel A. Weber
language : en
Publisher:
Release Date : 1992

Time Varying Devaluation Risk Interest Rate Differentials And Exchange Rates In Target Zones written by Axel A. Weber and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1992 with Monetary policy categories.

Target Zones And Forward Rates In A Model With Repeated Realignments

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Author : Gordon M. Bodnar
language : en
Publisher:
Release Date : 2006

Target Zones And Forward Rates In A Model With Repeated Realignments written by Gordon M. Bodnar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.

This paper studies the implications of the imperfect credibility of an exchange rate target zone on the terra structure of forward premia. The relationship between spot and forward exchange rates of different maturities reflects the possibility of repeated realignments of the exchange rate band. The credibility of the commitment to the target zone implicit in forward market data can be extracted by estimating the model. Application to French/German data indicates that the model is capable of matching observed patterns of interest rate differentials during the EMS, while yielding estimates of the credibility parameters that accord with the experience of the FF/DM exchange rate during the 1980s.

Target Zones And Exchange Rates

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Author : Geert Bekaert
language : en
Publisher:
Release Date : 1996

Target Zones And Exchange Rates written by Geert Bekaert and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Foreign exchange administration categories.

In this paper we develop an empirical model of exchange rates in a target zone. The model is general enough to nest most theoretical and empirical models in the existing literature. We find evidence of two types of jumps in exchange rates. Realignment jumps are those that are associated with the periodic realignments of the target zone and within-the-band jumps are those that can be accommodated within the current target zone. The exchange rate may jump outside the current target zone band, in the case of a realignment, but when no jump occurs the target zone is credible (there is zero probability of a realignment) and the exchange rate must stay within the band. We incorporate jumps, in general, by conditioning the distribution of exchange rate changes on a jump variable where the probability and size of a jump vary over time as a function of financial and macroeconomic variables. With this more general model, we revisit the empirical evidence from the European Monetary System regarding the conditional distribution of exchange rate changes, the credibility of the system, and the size of the foreign exchange risk premia. In contrast to some previous findings, we conclude that the FF/DM rate exhibits considerable non-linearities, realignments are predictable and the credibility of the system did not increase after 1987. Moreover, our model implies that the foreign exchange risk premium becomes large during speculative crises. A comparison with the Deutschemark/Dollar rate suggests that an explicit target zone does have a noticeable effect on the time-series behavior of exchange rates.

Stochastic Process Switching And Intervention In Exchange Rate Target Zones

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Author : Axel A. Weber
language : en
Publisher:
Release Date : 1991

Stochastic Process Switching And Intervention In Exchange Rate Target Zones written by Axel A. Weber and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with Foreign exchange categories.

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.

Working Paper Summaries Wp 92 1 Wp 92 47

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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1992-08-01

Working Paper Summaries Wp 92 1 Wp 92 47 written by International Monetary Fund 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 1992-08-01 with Business & Economics categories.

The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.

Expected And Predicted Realignments

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Author : Andrew Rose
language : en
Publisher:
Release Date : 1991

Expected And Predicted Realignments written by Andrew Rose and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with Devaluation of currency categories.

An empirical model of time-varying realignment risk in an exchange rate target zone is developed. Expected rates of devaluation are estimated as the difference between interest race differentials and estimated expected rates of depreciation within the exchange rate band, using French Franc/Deutsche Mark data during the European Monetary System. The behavior of estimated expected rates of depreciation accord well with the theoretical model of Bertola-Svensson (1990) . We are also able to predict actual realignments with some success.

Realignment Expectations In The Erm

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Author : Sinimaaria Ranki
language : en
Publisher:
Release Date : 1996

Realignment Expectations In The Erm written by Sinimaaria Ranki and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1996 with Banks and banking categories.

The purpose of this study is to analyze realignment expectations in the exchange rate mechanism of the European Monetary System, in particular with reference to the five year period (1987-1992) during which no realignments were done.

Imf Working Paper

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Author :
language : en
Publisher:
Release Date : 1994

Imf Working Paper written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Finance categories.