NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Determinants of Realignment Expectations Under the EMS: Some Empirical Regularities

Zhaohui Chen, Alberto Giovannini

NBER Working Paper No. 4291
Issued in March 1993
NBER Program(s):International Finance and Macroeconomics Program

The stability of the EMS depends crucially on realignment expectations of the market participants. In this paper we discuss how to measure such expectations and how to relate them to economic fundamentals, central bank reputation, and institutional arrangements of the EMS. We find the following empirical regularities for FF/DM and IL/DM exchange rates: (1) expected devaluations are positively related to the current exchange rate deviation from the central parity; (2) expected devaluations are negatively related to the length of time since last realignment in the short and medium run; (3) the Basle-Nyborg agreements seem to have a stabilizing effect for both currencies examined, albeit through different channels; (4) large revaluation expectations occur immediately after devaluations. (1) and (4) are not inconsistent with the hypothesis of over-speculation or market inefficiency.

download in pdf format
   (288 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4291

Published: European Economic Review, Vol. 41, no. 9 (December 1997): 1687-1707.

Users who downloaded this paper also downloaded* these:
Collins w4068 The Expected Timing of EMS Realignments: 1979-83
Rose and Svensson w3685 Expected and Predicted Realignments: The FF/DM Exchange Rate During the EMS
Chen and Giovannini w3955 Estimating Expected Exchange Rates Under Target Zones
Garber The Collapse of the Bretton Woods Fixed Exchange Rate System
Averett and Korenman w4521 The Economic Reality of the Beauty Myth
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us