Assessing the credibility of a target zone: Evidence from the EMS

Applied Economics

Volumn 37, Issue 19, 2005, Pages 2265-2287

  Ledesma Rodríguez, Francisco ^a   Navarro Ibáñez, Manuel ^a   Pérez Rodríguez, Jorge ^b   Sosvilla Rivero, Simón ^c  

^a UNIVERSIDAD DE LA LAGUNA   (Spain)

^b UNIVERSITY OF LAS PALMAS DE GRAN CANARIA   (Spain)

^c UNIVERSIDAD COMPLUTENSE DE MADRID   (Spain)

Author keywords

[No Author keywords available]

Indexed keywords

EUROPEAN UNION; FINANCIAL MARKET; MONETARY UNION; TARGETING;

EURASIA; EUROPE;

EID: 27744519436     PISSN: 00036846     EISSN: None     Source Type: Journal    
DOI: 10.1080/00036840500293722     Document Type: Article

References (40)

1. Allen, H. and Taylor, M. P. (1990) Charts, noise and fundamentals in the London foreign exchange market, Economic Journal, 100, 49-59.
2. Ayuso, J., Pérez-Jurado, M. and Restoy, F. (1994) Is exchange rate risk higher in the ERM after the widening of fluctuation bands? Documento de Trabajo 9419, Banco de España, Madrid.
3. Ayuso, J. and Restoy, F. (1992) Eficiencia y primas de riesgo en el euromercado de depósitos, Documento de Trabajo 9225, Banco de España, Madrid.
4. Bajo-Rubio, O., Sosvilla-Rivero, S. and Fernández-Rodríguez, F. (2001) Asymmetry in the EMS: new evidence based on non-linear forecasts, European Economic Review, 45, 451-73.
5. Bertola, G. and Caballero, R. J. (1992) Target zones and realignments, American Economic Review, 82, 520-36.
6. Bertola, G. and Svensson, L. E. O. (1993) Stochastic devaluation risk and the empirical fit of target zone models, Review of Economic Studies, 60, 689-712.
7. Clements, M. and Smith, J. (1999) A Monte Carlo study of the forecasting perfomance of empirical SETAR models, Journal of Applied Econometrics, 14, 123-41.
8. Cooper, W. W., Seiford L. M. and Tone, K. (2000) Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software, Kluwer Academic Publishers, Boston, MA.
9. Darvas, Z. (1998) Spurious correlation in exchange rate target zone modelling: testing the drift-adjustment method on the US dollar, random Walk and chaos, CEPR Discussion Paper No. 1890, Centre for Economic Policy Research, London.
10. De Grauwe, P. (2000) Economics of Monetary Union, 4th edn, Oxford University Press, Oxford.
11. De Grauwe, P., Dewachter, H. and Veestraeten, D. (1999) Explaining recent European exchange-rate stability, International Finance, 2, 1-31.
12. Dooley, M. P. and Shafer, J. (1983) Analysis of short-run exchange rate behaviour: March 1973 to November 1981, in Exchange Rate and Trade Instability: Causes, Consequences and Remedies (Eds) D. Bigman and T. Taya, Ballinger, Cambridge.
13. ECOFIN (2000) Questions relating to the applicant countries' economic stability and exchange rate strategy: conclusions, 2283rd Council meeting, Brussels, July 17 (available at http://ue.eu.int/newsroom/ main.cfml).
14. Edin, P.-A. and Vredin, A. (1993) Devaluation risk in target zones: evidence from the nordic countries, Economic Journal, 103, 161-75.
15. Engel, C. and Hakkio, C. S. (1996) The distribution of the exchange rate in the EMS, International Journal of Finance and Economics, 1, 55-67.
16. Farrell, M. J. (1957) The measurement of productive efficiency, Journal of Royal Statistical Society, Series A, General, 120, 253-81.
17. Fernández-Rodríguez, F., Sosvilla-Rivero, S. and Martín-González, J. (2003) Credibility in the EMS: new evidence using nonlinear forecastability tests, European Journal of Finance, 9, 146-68.
18. García, R. and Gençay, R. (2000) Pricing and hedging derivative securities with neural networks and a homogeneity hint, Journal of Econometrics, 94, 93-115.
19. Gómez, M. and Montalvo, J. G. (1997) A new indicator to assess the credibility of the EMS, European Economic Review, 41, 1511-35.
20. Heckman, J. (1976) The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models, Annals of Economic and Social Measurement, 5, 475-92.
21. Hendry, D. F. (1995) Dynamic Econometrics, Oxford University Press, Oxford.
22. Honohan, P. (1979) A guide to the arithmetic of the EMS exchange-rate mechanism, Central Bank of Ireland Quarterly Bulletin, Autumn.
23. Kempa, B. and Nelles, M. (1999) The theory of exchange rate target zones, Journal of Economic Surveys, 13, 173-210.
24. Krugman, P. R. (1991) Target zones and exchange rate dynamics, Quarterly Journal of Economics, 106, 669-82.
25. LeBaron, B. (1992) Do moving average rule results imply nonlinearities in foreign exchange markets?, SSRI Working Paper No. 9222, University of Wisconsin-Madison.
26. Ledesma-Rodríguez, F., Navarro-Ibañez, M., Pérez-Rodríguez, J. and Sosvilla-Rivero, S. (1999a) Una aproximación a la credibilidad de la peseta en el Sistema Monetario Europeo, Moneda y Crédito, 209, 195-230.
27. Ledesma-Rodríguez, F., Navarro-Ibañez, M., Pérez-Rodríguez, J. and Sosvilla-Rivero, S. (1999b) Una aproximación a la credibilidad del escudo en el Sistema Monetario Europeo, Economia, 23, 69-95.
28. Ledesma-Rodríguez, F., Navarro-Ibañez, M., Pérez-Rodríguez, J. and Sosvilla-Rivero, S. (2000) On the credibility of the Irish pound in the EMS, Economic and Social Review, 31, 151-72.
29. Levich, R. and Thomas, L. (1993) The significance of technical trading rule profits in the foreign exchange market: a bootstrap approach, Journal of International Money and Finance, 12, 451-74.
30. Lindberg, H., Söderlind, P. and Svensson, L. E. O. (1993) Devaluation expectations: the Swedish krona 1985-92, Economic Journal, 103, 1170-79.
31. Rose, A. K. and Svensson, L. E. O. (1994) European exchange rate credibility before the fall, European Economic Review, 38, 1185-216.
32. Seiford, L. M. and Thrall, R. M. (1990) Recent developments in DEA: the mathematical approach to frontier analysis, Journal of Econometrics, 46, 7-38.
33. Sosvilla-Rivero, S., Fernández-Rodríguez, F. and Bajo-Rubio, O. (1999) Exchange rate volatility in the EMS before and after the fall, Applied Economics Letters, 6, 717-22.
34. Svensson, L. E. O. (1991) The simplest test of target zone credibility, IMF Staff Papers, 38, 655-65.
35. Svensson, L. E. O. (1992) The foreign exchange risk premium in a target zone with devaluation risk, Journal of International Economics, 33, 21-40.
36. Svensson, L. E. O. (1993) Assessing target zone credibility: mean reversion and devaluation expectations in the ERM, 1979-1992, European Economic Review, 37, 763-802.
37. Taylor, S. J. (1992) Rewards available to currency future speculators: compensation for risk or evidence of inefficient pricing?, Economic Record, 68, 105-16.
38. Taylor, M. P. and Allen, H. (1992) The use of technical analysis in the foreign exchange market, Journal of International Money and Finance, 11, 304-14.
39. Weber, A. (1991a) EMS credibility, Economic Policy, 12, 58-102.
40. Weber, A. (1991b) Stochastic process switching and intervention in exchange rate target zones: empirical evidence from the EMS, CEPR Discussion Paper No. 554, Centre for Economic Policy Research, London.