Devaluation Risk in Target Zones: Evidence from the Nordic Countries.
In this paper, the authors estimate devaluation risk in Denmark, Finland, Norway, and Sweden. The target exchange ra te is modeled as a censored variable, a "shadow peg" that is only observed when the equilibrium floating rate is too far from the prevailing peg. Using a two-step procedure, the authors are able to calculate time series of the probability and expected size of devaluations. Th e probability as well as the size of devaluations seem to be systematically related to a relation between the money stock, industrial production, foreign exchange reserves, and the prevailing central parity. Copyright 1993 by Royal Economic Society.
Year of publication: |
1993
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Authors: | Edin, Per-Anders ; Vredin, Anders |
Published in: |
Economic Journal. - Royal Economic Society - RES, ISSN 1468-0297. - Vol. 103.1993, 416, p. 161-75
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Publisher: |
Royal Economic Society - RES |
Saved in:
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