S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 20:
Explaining Devaluation Expectations in the EMS

Alexis Stenfors and Ulf Söderström

Abstract: This paper is an attempt to explain devaluation expectations in the ERM with macroeconomic fundamentals. Two different measures of devaluation expectations are used; expectations estimated using the drift-adjustment method of Bertola and Svensson [1993] and the directly observable interest rate differential. The interest rate differential seems more closely connected to macroeconomic fundamentals than the estimates stemming from the drift- adjustment metod. For the ERM as a whole, an expanded theoretic model of exchange rate determination explains a considerable part of the devaluation expectations, whereas for individual countries additional variables are important, and the relationships are ambiguous and country specific.

Keywords: Target zones; interest rates; realignments; (follow links to similar papers)

JEL-Codes: E43; E44; F31; (follow links to similar papers)

30 pages, June 1994

Download Statistics


This paper is published as:
Stenfors, Alexis and Ulf Söderström, (1995), 'Explaining Devaluation Expectations in the EMS', Finnish Economic Papers, Vol. 8, pages 63-81



Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:hastef:0020 This page was generated on 2014-12-14 19:22:48