A Non-parametric reassessment of target zone nonlinearities: The Spanish Peseta/Deutsche Mark exchange rate

Consuelo Gámez Amián () and Jose Torres ()
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Consuelo Gámez Amián: Universidad de Málaga, http://www.uma.es

No E2004/73, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: In this paper we present evidence concerning the existence of target zone nonlinearities in the Spanish Peseta/Deutsche Mark exchange rate using data with daily frequency for the period 1989-1996. Using a non-parametric technique, the Alternation Conditional Expectations (ACE) algorithm, we obtain evidence of the existence of non-linearities in both exchange rate and interest rate differential, with a functional form close to the non-linear effects given by the target zone model with realignment risk.

Keywords: Target zones; exchange rate; realignment risk; ACE algorithm (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004
New Economics Papers: this item is included in nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:cea:doctra:e2004_73

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