Central bank interventions and exchange rate band regimes
Article Abstract:
This paper presents an endogenous switching regression model for the exchange rate process where the switch is defined by the central bank criteria functions for intervening. We study the signal effect of interventions on the exchange rate using Norwegian daily data on official interventions. We first find that interventions seemed to have been more effective in moving the exchange rate in the expected (`desired') direction in the regime when the exchange rate was kept away from the edges of the band. This type of intervention regime also reduces significantly the conditional volatility of the exchange rate. Thus, when the exchange rate was near the weakest edge of the currency band, its conditional variance was significantly larger than when it was moving around its central parity. Finally, we show that in order to obtain consistent estimates, intervention variables cannot enter as exogenous variables in the conditional mean (or conditional variance) of the exchange rate. JEL classification: F31; E58; C32 Keywords: Sterilized interventions; Exchange rate bands; Heteroskedasticity
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 2001
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Emerging market debt: measuring credit quality and examining relative pricing
Article Abstract:
We investigate the pricing of `Brady' bonds that are issued by the governments of five developing countries as part of debt and debt service reduction agreements. We first present a measure of credit quality that takes account of the individual features of each bond and is comparable across bonds, across issuers, and over time. We then examine the evolution of the credit quality of each debt instrument from 1990 until the beginning of 2000. Next, we present evidence of a profitable trading strategy that exploits the information contained in this measure of credit quality. JEL classification: F32; F34 Keywords: Emerging market debt; Credit risk; Brady bonds
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 2001
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Money demand in Euroland
Article Abstract:
This paper explores the determinants of alternative monetary aggregates in Euroland. A sample consisting of quarterly data covering the 1980:1-1998:4 period is considered. We are interested whether a conventionally defined money demand equation is stable in some aggregates as opposed to others. Both long-run and short-run relationships are considered in this paper. Overall, the results indicate that broad (narrow) money demand in Euroland is a stable (unstable) function of Euroland-wide income and interest rates. JEL classification: E41; C32; E52 Keywords: Money demand; Monetary policy; European Central Bank
Publication Name: Journal of International Money and Finance
Subject: Economics
ISSN: 0261-5606
Year: 2001
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