Explaining ERM realignments: Insights from optimising models of currency crises

F G Ozkan

doi:10.1016/j.jmacro.2002.08.001

Explaining ERM realignments: Insights from optimising models of currency crises

F G Ozkan

Economics

Research output: Contribution to journal › Article › peer-review

Abstract

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. (C) 2003 Elsevier Inc. All rights reserved.

Original language	English
Pages (from-to)	491-507
Number of pages	17
Journal	Journal of Macroeconomics
Volume	25
Issue number	4
DOIs	https://doi.org/10.1016/j.jmacro.2002.08.001
Publication status	Published - Dec 2003

Keywords

currency crisis
parity changes
probability of devaluations
ERM
POLICY
CREDIBILITY
DEVALUATION
RISK

Access to Document

10.1016/j.jmacro.2002.08.001

http://dx.doi.org/10.1016/j.jmacro.2002.08.001

Cite this

@article{9a875b82c3e742f2b0b8ad3522070996,

title = "Explaining ERM realignments: Insights from optimising models of currency crises",

abstract = "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. (C) 2003 Elsevier Inc. All rights reserved.",

keywords = "currency crisis, parity changes, probability of devaluations, ERM, POLICY, CREDIBILITY, DEVALUATION, RISK",

author = "Ozkan, {F G}",

year = "2003",

month = dec,

doi = "10.1016/j.jmacro.2002.08.001",

language = "English",

volume = "25",

pages = "491--507",

journal = "Journal of Macroeconomics",

issn = "0164-0704",

publisher = "Elsevier",

number = "4",

}

TY - JOUR

T1 - Explaining ERM realignments: Insights from optimising models of currency crises

AU - Ozkan, F G

PY - 2003/12

Y1 - 2003/12

N2 - 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. (C) 2003 Elsevier Inc. All rights reserved.

AB - 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. (C) 2003 Elsevier Inc. All rights reserved.

KW - currency crisis

KW - parity changes

KW - probability of devaluations

KW - ERM

KW - POLICY

KW - CREDIBILITY

KW - DEVALUATION

KW - RISK

U2 - 10.1016/j.jmacro.2002.08.001

DO - 10.1016/j.jmacro.2002.08.001

M3 - Article

SN - 0164-0704

VL - 25

SP - 491

EP - 507

JO - Journal of Macroeconomics

JF - Journal of Macroeconomics

IS - 4

ER -