Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate

Michael Burda and Stefan Gerlach ()

No 485, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the exchange rate between the East and West German mark in the period before German monetary union. We show that standard exchange rate theory contains strong predictions about the dynamics of the exchange rate under these circumstances, and we use state-space methods to estimate key parameters of the model. A random-walk model gives a good fit to the first half of the data, during which it was unclear that monetary union would occur. In the second half, when union was expected, the Ostmark rate behaves as a weighted average of fundamentals and the expected terminal exchange rate.

Keywords: Deutschmark; Kalman Filtering; Monetary Union; Ostmark (search for similar items in EconPapers)
Date: 1990-12
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=485 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Exchange Rate Dynamics and Currency Unification: The Ostmark-DM Rate (1993)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:485

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=485

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().