European Exchange Rate Credibility Before the Fall

Andrew Rose and Lars E O Svensson

No 852, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Realignment expectations which measure exchange rate credibility are analysed for European exchange rates using daily financial data since the inception of the EMS. It is difficult to find economically meaningful relationships between realignment expectations and macroeconomic variables, although there are signs that lower inflation improves credibility. Statistically, many movements to realignment expectations are common to ERM participants. There were few indications of poor ERM credibility before late August 1992; the dimensions of the currency crisis of September 1992 appear to have taken both policy-makers and private agents largely by surprise.

Keywords: Currency Crisis; EMS; ERM; Expectations; Realignment (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 1993-11
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Citations: View citations in EconPapers (20)

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Journal Article: European exchange rate credibility before the fall (1994)
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Working Paper: European Exchange Rate Credibility Before the Fall (1993)
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