Exchange Risk in the EMS: Some Evidence Based on a GARCH Model

Christis Hassapis

Bulletin of Economic Research, 1995, vol. 47, issue 4, 295-303

Abstract: The paper attempts to detect any changes in the exchange risk as measured by the conditional variance of exchange rate changes before and after foundation of the EMS. The analysis is based on estimation of an econometric model in which the conditional variance is allowed to follow an autoregressive pattern. The results indicate a significant decrease in the volatility of the conditional variance and the risk premium for the EMS countries over the EMS period. No such changes are detected for the non-EMS countries. Copyright 1995 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1995
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