Detection of implicit fluctuation bands and their credibility in EU candidate countries

Simon Sosvilla-Rivero and María del Carmen Ramos-Herrera ()
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María del Carmen Ramos-Herrera: Universidad Complutense de Madrid

Baltic Journal of Economics, 2015, vol. 15, issue 1, 18-37

Abstract: This paper attempts to identify implicit exchange-rate regimes for currencies of candidate countries vis-à-vis the euro. To that end, we apply three sequential procedures that consider the dynamics of exchange rates to data covering the period from 1999:01 to 2012:12. Our results would suggest that implicit bands have existed in many sub-periods for almost all currencies under study. Once we detect de facto discrepancies between de facto and de iure exchange-rate regimes, we make use of different methods to study the credibility of the detected fluctuation bands. The detected lack of credibility in a high percentage of the sample is robust to the use of several credibility tests, suggesting that economic agents do not behave as if these bands actually were in force at time of making their financial plans. These countries do not improve the confidence on the fluctuation bands as time evolves.

Keywords: credibility; exchange rates; exchange-rate regimes; implicit fluctuation bands (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2015
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Working Paper: Detection of Implicit Fluctuation Bands and their Credibility in Candidate Countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:15:y:2015:i:1:p:18-37

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