Explaining ERM realignments: Insights from optimising models of currency crises

This paper attempts to provide empirical evidence on the determinants of the realignments throughout the European exchange rate mechanism (ERM). Motivated by the implications of optimising currency crisis models, we relate the probability of “crises” to a set of macroeconomic fundamentals. By using...

Full description

Saved in:
Bibliographic Details
Published inJournal of macroeconomics Vol. 25; no. 4; pp. 491 - 507
Main Author Ozkan, F.Gulcin
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier Inc 01.12.2003
Elsevier
Elsevier Science Ltd
SeriesJournal of Macroeconomics
Subjects
Currencies
Currency
Currency crisis
Currency devaluation
Devaluation
Economic crisis
Economic models
ERM
Europe
Exchange Rate Mechanism
Foreign exchange rates
Industrial production
Macroeconomics
Parity
Parity changes
Probability
Probability of devaluations
Studies
ERM
Currency crisis
Probability of devaluations
F32
F31
Parity changes
Online AccessGet full text

Cover

More Information
Summary:This paper attempts to provide empirical evidence on the determinants of the realignments throughout the European exchange rate mechanism (ERM). Motivated by the implications of optimising currency crisis models, we relate the probability of “crises” to a set of macroeconomic fundamentals. By using a conditional binominal logit model we show that regime switches are strongly influenced by movements in industrial production, foreign interest rates, competitiveness and imports as well as in foreign exchange reserves. These findings are consistent with the general propositions of recent currency crises models.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0164-0704
1873-152X
DOI:10.1016/j.jmacro.2002.08.001