The paper has assessed market participants' confidence in the national currency of Latvia in the period between January 2001 and April 2003 using as the basis the position of the lats interest rates within the interest rate corridor. For the purpose of the study, the method of Lars E. O....

The paper is a generalisation of L. E. O. Svensson's simplest test of target zone credibility and the drift-adjustment method in the context of anticipated planned repegging. In 1994, the Latvian lats was pegged to the SDR basket of currencies but on 30 December 2004 the lats was pegged to the...