The determinants of realignment expectations under the EMS: Some empirical regularities

European Economic Review

Volumn 41, Issue 9, 1997, Pages 1687-1707

  Chen, Zhaohui ^a   Giovannini, Alberto ^b  

^a INTERNATIONAL MONETARY FUND   (United States)

^b CEPR   (United Kingdom)

Author keywords

EMS; Exchange rate determination; Exchange rate expectation

Indexed keywords

EID: 0001017984     PISSN: 00142921     EISSN: None     Source Type: Journal    
DOI: 10.1016/S0014-2921(96)00047-5     Document Type: Article

References (29)

1. Abel, Mishkin, 1983. An integrated view of rationality, market efficiency and the short-run neutrality of monetary policy. Journal of Monetary Economics 9, 3-24.
2. Barro, R.J., Gordon, D.B., 1983. A positive theory of monetary policy in a natural rate model. Journal of Political Economy 91 (4), 589-610.
3. Bernanke, B., Mishkin, F.S., 1992. Guideposts and signals in the conduct of monetary policy: lessons from six industrialized countries. Manuscript, Columbia University.
4. Bertola, G., Svensson, L.E.O., 1993. Stochastic devaluation risk and the empirical fit of target zone models. Review of Economic Studies.
5. Calvo, G., 1983. Trying to stabilize: some theoretical reflections based on the case of Argentina. In: Aspe Armella, P., Dornbusch R., Obstfeld, M. (Eds.), Financial Policies and the World Capital Market: The Problem of Latin American Countries. Chicago Univ. Press, for NBER, Chicago.
6. Caramazza, F., 1993. French-German interest rate differentials and time-varying realignment risk. IMF Staff Papers 40, 567-583.
7. Chen, Z., Giovannini, A., 1992a. The credibility of adjustable parities, Mimeo, Columbia University, presented at the Ossola Memorial Conference, July.
8. Chen, Z., Giovannini, A., 1992b. Estimating expected exchange rates under target zones. National Bureau of Economic Research Working Paper 3955, Cambridge, MA.
9. Chen, Z., Giovannini, A., 1992c. Target zones and exchange rate distribution: an estimation method. Economics Letters 40, 83-89.
10. Diaz Alejandro, C.F., 1981. Southern cone stabilization plans. In: Cline W.R., Weintraub, S. (Eds.), Economic Stabilization in Developing Countries. Brookings Institution, Washington, DC.
11. Dornbusch, R., 1982. Stabilization policies in developing countries: what have we learned?. World Development 10 (9), 701-708.
12. Flood, R.P., Garber, P., 1984. Collapsing exchange rate regimes: some linear examples. Journal of International Economics 17, 1-13.
13. Friedman, M., 1968. The role of monetary policy. American Economic Review 58, 1-17.
14. Ghisellini, F., 1992. Credibility and hard currency options in the transition to economic and monetary union. Mimeo, Ministero del Tesoro, Roma.
15. Giovannini, A., 1990. European monetary reform: progress and prospects. Brookings Papers on Economic Activity 2, 217-292.
16. Giovannini, A., 1992. The capital inflow problem in the EMS. Mimeo, Columbia University.
17. Hansen, L.P., Hodrick, R., 1980. Forward exchange rates as optimal predictors of future spot rates: an econometric analysis. Journal of Political Economy 88, 829-853.
18. Hansen, L.P., Singleton, 1982. Generalized instrumental variables estimation of nonlinear rational expectations models. Econometrica 50, 1269-1286.
19. Krugman, P., 1991. Target zones and exchange rate dynamics. Quarterly Journal of Economics 106, 669-682.
20. Lindberg, P., Soderlind, P., Svensson, L.E.O., 1993. Devaluation expectations: the Swedish Krona 1985-92. Economic Journal 103 (420), 1170-1179.
21. Lizondo, J.S., 1983. Foreign exchange futures prices under fixed exchange rates. Journal of International Economics 14, 69-84.
22. Mishkin, F.S., 1981. The real interest rate: an empirical investigation. Carnegie-Rochester Conference Series on Public Policy 15, 151-200.
23. Newey, W.K., West, K.D., 1987. A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55, 703-708.
24. Rose, A.K., Svensson L.E.O., 1991. Expected and predicted realignments: the FF/DM exchange rate during the EMS. University of Stockholm IIES Seminar Paper 485 (NBER Working Paper 3685).
25. Rose, A.K., Svensson, L.E.O., 1994. European exchange rate credibility before the fall. European Economic Review 38 6, 1185-1216.
26. Simons, H.C., 1936. Rules versus authorities in monetary policy. Journal of Political Economy 44 (1), 1-30.
27. Svensson, L.E.O., 1992. The foreign exchange risk premium in a target zone with devaluation risk. Journal of International Economics 33, 21-40.
28. Svensson, L.E.O., 1993. Assessing target-zone credibility: mean reversion and devaluation expectations in the ERM, 1979-1992. European Economic Review 37 (4), 763-793.
29. Vajanne, L., 1993. The exchange rate under target zones: theory and evidence on the Finnish Markka. ETLA Series A16 (Helsinki).