Chapter 5 European Exchange Rate Credibility: An Empirical Analysis
Nonlinear Modeling of Economic and Financial Time-Series
ISBN: 978-0-85724-489-5, eISBN: 978-0-85724-490-1
Publication date: 31 December 2010
Abstract
Purpose – The aim of this chapter is to study the determinants of realignment expectations (as a measure of the exchange rate credibility).
Methodology/approach – To investigate this aspect, we apply a fixed effects model over the period 2001:01–2009:12 for a set of 14 European countries.
Findings – Using monthly data since the introduction of the euro, the chapter finds that standard macroeconomic phenomena and financial crisis over the selected period exerted a significant and positive impact on European realignment expectations. We also provide evidence that the 2008 global financial crisis has a significant effect on realignment expectations.
Originality/value of chapter – At our best knowledge, the single paper that studied a similar problem since the inception of the European Monetary System (EMS) in early 1979 was the research paper of Rose and Svensson (1993). Our findings are original in the sense that we find meaningful relationships between realignment expectations and financial crisis (systemic and nonsystemic crisis) and macroeconomic variables. Our research also wishes to contribute to the emergence of the recent studies on European exchange rate credibility.
Keywords
Citation
Matei, I. (2010), "Chapter 5 European Exchange Rate Credibility: An Empirical Analysis", Jawadi, F. and Barnett, W.A. (Ed.) Nonlinear Modeling of Economic and Financial Time-Series (International Symposia in Economic Theory and Econometrics, Vol. 20), Emerald Group Publishing Limited, Leeds, pp. 111-119. https://doi.org/10.1108/S1571-0386(2010)0000020010
Publisher
:Emerald Group Publishing Limited
Copyright © 2010, Emerald Group Publishing Limited