Expected and Predicted Realignments: The FF/DM Exchange Rate During the EMS

Andrew Rose and Lars Svensson

No 552, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: An empirical model of time-varying realignment in an exchange rate target zone is developed. Expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band, using French franc/Deutschmark data during the European Monetary System. The behaviour 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.

Keywords: Devaluation; European Monetary System; Exchange Rate; Realignment; Target Zone (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 1991-07
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Related works:
Working Paper: Expected and predicted realignments: the FF/DM exchange rate during the EMS (1991)
Working Paper: Expected and Predicted Realignments: the FF/DM Exchange Rate during the EMS (1991)
Working Paper: Expected and Predicted Realignments: The FF/DM Exchange Rate During the EMS (1991)
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