An empirical reassessment of target-zone nonlinearities

In this paper we investigate the presence of target-zone nonlinearities in the Pound Sterling/German Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership using data with frequency of every 2 days. Tests against general nonlinear specifications as well as spec...

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Detalles Bibliográficos
Autores principales:	Garratt, A., Psaradakis, Z., Sola, M.
Formato:	JOUR
Materias:	Bayesian analysis Bootstrap C22 F31 Nonlinearity Recursive tests Target zone
Acceso en línea:	http://hdl.handle.net/20.500.12110/paper_02615606_v20_n4_p533_Garratt
Aporte de:	Biblioteca Digital - Facultad de Ciencias Exactas y Naturales (UBA) de Universidad de Buenos Aires

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spelling	todo:paper_02615606_v20_n4_p533_Garratt2023-10-03T15:12:31Z An empirical reassessment of target-zone nonlinearities Garratt, A. Psaradakis, Z. Sola, M. Bayesian analysis Bootstrap C22 F31 Nonlinearity Recursive tests Target zone In this paper we investigate the presence of target-zone nonlinearities in the Pound Sterling/German Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership using data with frequency of every 2 days. Tests against general nonlinear specifications as well as specifications consistent with a stochastic devaluation risk model of exchange rate target zones are carried out using recursive techniques. In addition, the significance of nonlinear effects is analysed within a recursive Bayesian framework. We find evidence of target-zone nonlinearities in the whole sample but the recursive analysis yields support for the presence of such nonlinearities only in specific subsamples. Our results imply that the reduction in the UK inflation rate was most likely a consequence of contractionary policies rather than of the expectational effects associated with the target zone. © 2001 Elsevier Science Ltd. JOUR info:eu-repo/semantics/openAccess http://creativecommons.org/licenses/by/2.5/ar http://hdl.handle.net/20.500.12110/paper_02615606_v20_n4_p533_Garratt
institution	Universidad de Buenos Aires
institution_str	I-28
repository_str	R-134
collection	Biblioteca Digital - Facultad de Ciencias Exactas y Naturales (UBA)
topic	Bayesian analysis Bootstrap C22 F31 Nonlinearity Recursive tests Target zone
spellingShingle	Bayesian analysis Bootstrap C22 F31 Nonlinearity Recursive tests Target zone Garratt, A. Psaradakis, Z. Sola, M. An empirical reassessment of target-zone nonlinearities
topic_facet	Bayesian analysis Bootstrap C22 F31 Nonlinearity Recursive tests Target zone
description	In this paper we investigate the presence of target-zone nonlinearities in the Pound Sterling/German Mark exchange rate for the period of the UK European Exchange Rate Mechanism (ERM) membership using data with frequency of every 2 days. Tests against general nonlinear specifications as well as specifications consistent with a stochastic devaluation risk model of exchange rate target zones are carried out using recursive techniques. In addition, the significance of nonlinear effects is analysed within a recursive Bayesian framework. We find evidence of target-zone nonlinearities in the whole sample but the recursive analysis yields support for the presence of such nonlinearities only in specific subsamples. Our results imply that the reduction in the UK inflation rate was most likely a consequence of contractionary policies rather than of the expectational effects associated with the target zone. © 2001 Elsevier Science Ltd.
format	JOUR
author	Garratt, A. Psaradakis, Z. Sola, M.
author_facet	Garratt, A. Psaradakis, Z. Sola, M.
author_sort	Garratt, A.
title	An empirical reassessment of target-zone nonlinearities
title_short	An empirical reassessment of target-zone nonlinearities
title_full	An empirical reassessment of target-zone nonlinearities
title_fullStr	An empirical reassessment of target-zone nonlinearities
title_full_unstemmed	An empirical reassessment of target-zone nonlinearities
title_sort	empirical reassessment of target-zone nonlinearities
url	http://hdl.handle.net/20.500.12110/paper_02615606_v20_n4_p533_Garratt
work_keys_str_mv	AT garratta anempiricalreassessmentoftargetzonenonlinearities AT psaradakisz anempiricalreassessmentoftargetzonenonlinearities AT solam anempiricalreassessmentoftargetzonenonlinearities AT garratta empiricalreassessmentoftargetzonenonlinearities AT psaradakisz empiricalreassessmentoftargetzonenonlinearities AT solam empiricalreassessmentoftargetzonenonlinearities
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An empirical reassessment of target-zone nonlinearities

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