Expected and predicted realignments: the FF/DM exchange rate during the EMS

Andrew Rose and Lars E. O. Svensson

No 395, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: An empirical model of time-varying realignment risk in an exchange rate target zone is developed. Expected rates of devaluation are estimated as the difference between interest rate differentials and estimated expected rates of depreciation within the exchange rate band, using French Franc/Deutsche Mark data during the European Monetary System. The behavior of estimated expected rates of depreciation accord well with the theoretical model of Bertola-Svensson (1990). We are also able to predict actual realignments with some success.

Keywords: European Monetary System (Organization); Foreign exchange rates (search for similar items in EconPapers)
Date: 1991
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Related works:
Working Paper: Expected and Predicted Realignments: The FF/DM Exchange Rate During the EMS (1991)
Working Paper: Expected and Predicted Realignments: the FF/DM Exchange Rate during the EMS (1991)
Working Paper: Expected and Predicted Realignments: The FF/DM Exchange Rate During the EMS (1991)
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