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Germany prides itself in having one of the most successful central banks and national currencies with respect to independence and stability. I show that not only were both imposed on the country after 1945, but that German experts and officials resisted both initially. It thus represents a rare case of the successful imposition of institutions from abroad. Events are discussed in light of Peter Bernholz's requirements of stable money and an independent central bank. [ABSTRACT FROM AUTHOR]

New tests, based on smooth transition autoregressive models, for mean reversion in time series of real exchange rates are proposed. One test forces mean reversion to be symmetric about the integrated process central case, while the other permits asymmetry. The tests are applied to monthly series of seventeen real exchange rates against the U.S. dollar and fourteen against the deutsche mark. They reveal stronger evidence against the unit root null hypothesis than does the usual Dickey-Fuller test. [ABSTRACT FROM AUTHOR]

German war aims in 1918 were shaped in part by a consensus among German policy-makers, but also in part by competing visions of national security. The growing conviction that economic production and access to raw materials shaped German perceptions of security. For some, this meant control over an extensive network of production facilities in Eastern Europe. For others, the viability of the Mark as a stable means of exchange took priority. The ways in which these competing visions were negotiated could result in more radical goal as in Lithuania and Courland, or might limit the extension of German influence, as in Ukraine. In particular, the financial concerns of the Reichsbank and Treasury alternately obstructed and radicalized German policy in the former Russian Empire. Both bodies feared that any substantial outlays to secure control over productive assets would endanger the stability of the Mark, but both favoured extending controls over Lithuania and Courland for the same reason. The article highlights competing forms of domination advocated by different branches of the German government and the impact intramural fights had on German expansionism. It also underlines the significance of the financial components of German expansion. [ABSTRACT FROM AUTHOR]

The article focuses on the Plaza Agreement and an associative relationship between shifts in the U.S. trade balance and the impact of trade-balance announcements on exchange rates. An evaluation of shifts in currency values for the American dollar, German Deutsche mark, and Japanese yen during 1980 to 1988 is made with event-study methods and a monetary model for an open economy. The influence of anticipated future policies on exchange rates, the sticky-price model, equations for money market equilibrium, shifts in an equilibrium real exchange rate, long-run equilibrium value, the Chow statistic, and information asymmetry are mentioned. The study suggests that the Plaza Agreement encouraged industrial countries to coordinate and actively manage their policies on external imbalances.

The article focuses on international currency substitution and the movements of money's income velocity of circulation in the U.S. and Germany. It states that short-term interest rate behavior in Germany and the U.S. suggests that the relative opportunity costs and variances of expected rates of return on the deutsche mark and U.S. dollar has grown slowly from 1970 to 1980 to favor the deutsche mark. It suggests that U.S. money velocity movements have been affected significantly by shorter-term variable fluctuations which have induced international portfolio shifts. It states that a shift in currency demand toward the deutsche mark has resulted due to increased opportunity cost and risk associated with holding dollars.

This paper provides a detailed characterization of the volatility in the deutsche mark-dollar foreign exchange market using an annual sample of five-minute returns. The approach captures the intraday activity patterns, the macroeconomic announcements, and the volatility persistence (ARCH) known from daily returns. The different features are separately quantified and shown to account for a substantial fraction of return variability, both at the intraday and daily level. The implications of the results for the interpretation of the fundamental "driving forces" behind the volatility process is also discussed. [ABSTRACT FROM AUTHOR]

Recent empirical evidence suggests that the interdaily volatility clustering for most speculative returns are best characterized by a slowly mean-reverting fractionally integrated process. Meanwhile, much shorter lived volatility dynamics are typically observed with high frequency intradaily returns. The present article demonstrates, that by interpreting the volatility as a mixture of numerous heterogeneous short-run information arrivals, the observed volatility process may exhibit long-run dependence. As such, the long-memory characteristics constitute an intrinsic feature of the return generating process, rather than the manifestation of occasional structural shifts. These ideas are confirmed by our analysis of a one-year time series of five-minute Deutschemark-U.S. Dollar exchange rates. [ABSTRACT FROM AUTHOR]

The behavior of quote arrivals and bid-ask spreads is examined for continuously recorded deutsche mark-dollar exchange rate data over time, across locations, and by market participants. A pattern in the intraday spread and intensity of market activity over time is uncovered and related to theories of trading patterns. Models for the conditional mean and variance of returns and bid-ask spreads indicate volatility clustering at high frequencies. The proposition that trading intensity has an independent effect on returns volatility is rejected, but holds for spread volatility. Conditional returns volatility is increasing in the size of the spread. [ABSTRACT FROM AUTHOR]

This paper investigated the behavior of daily foreign currency price changes expressed in terms of the U.S. dollar for the British pound, the German mark and the Canadian dollar. Its purpose was to describe the price change distributions and to test whether these price changes conformed to an efficient market model. The price change distributions were leptokurtic. This type of distribution is consistent with an assertion that intrinsic or fundamental values may change rapidly in a very short period of time [8, p. 94] thus making it difficult for a private market participant to extricate himself from a deteriorating position. It is also consistent with the assertion that monetary authorities smooth out daily (short-run) fluctuations in their respective currencies in that the effect of these policies would be to cause a relatively large concentration of small price changes to be observed. From a methodological point of view, the leptokurtic price change distribution suggests that models and explanations of foreign exchange market behavior which rely on assumptions of normalcy may not be appropriate. The results of time series analysis show that the market efficiency hypothesis may be accepted for the British pound and the German mark. It is rejected for the Canadian dollar where it was found that daily price changes tended to underrespond to new information. This underresponse may be attributed to the efficacy of central bank intervention and the institutional character of the Canadian dollar exchange market. It is possible that the inefficiency observed may provide a potential for returns to speculation. Although transaction costs may eliminate any potential gains for most participants, large financial institutions and multinational firms may be able to benefit from the observed lack of independence in the management of their worldwide liquidity positions. However, a precise specification of the pattern and magnitude of price changes resulting from... [ABSTRACT FROM AUTHOR]

The issue examined in this paper is whether the empirical phenomena are consistent with a monetarist interpretation. Two approaches to exchange rate determination are distinguished in Section I. One approach is based on applications of the monetary theory of the balance of payments to freely floating and managed floating exchange rate systems. The model assumes purchasing power parity and relates exchange rate and official reserve fluctuations to differential rates of growth of money demand and supply in the home country and the rest of the world. The alternative approach assumes some short run price rigidity and treats exchange rates as being determined by interest rate parity. In this case, changes in the domestic money supply may lead to more than proportionate change in the spot exchange rate, so that short run fluctuations in exchange rates exceed fluctuations in the domestic money supply. Section II reports the results of tests of the two approaches for Canada, Germany, and the United Kingdom. Two issues are explored: (1) whether fluctuations in the dollar exchange rates for each country are related to differential rates of growth of money and real income in each country relative to the U.S. and (2) whether variations in the exchange rate patterns for the three countries can be attributed to differences in exchange rate-money supply elasticities, which are inferred from structural parameters affecting interest rate parity. Conclusions are presented in Section III. [ABSTRACT FROM AUTHOR]

Develops a method for pricing options on stochastic volatility/jump diffusion process under systematic jump and volatility risk in the United States. Parameters implicit in deutsche mark (DM) options; Analysis of the Philadelphia Stock Exchange foreign currency options; Compatibility between the implicit volatilities and the dollar/DM futures prices.

The article is a reply to Marc A. Miles and D. Sykes Wilford who commented on research methods used in a study concerning efficient market theory and price changes of the Canadian dollar, German mark, and British pound in the foreign exchange market. The issues of currency substitution, economic elasticity, markets characterized by a random walk, and serial correlations of price change distribution are mentioned. The study found that the Canadian dollar is inefficient because there is an exchange market's tendency to under-respond to new information.

The article comments on research by John Burt, Fred R. Kaen, and G. Geoffrey Booth--which is referred to as the BKB model--concerning foreign exchange market efficiency and the effectiveness of central bank interventions in stabilizing exchange rates. The spot exchange markets for Canadian dollars, German marks and British pounds are discussed, as well as a hypothesis that efficient market theory does not apply to the Canadian dollar because daily price variance did not fully respond to new information. Central bank intervention, institutional aspects of the Canadian exchange market are not believed to be the reason for the lack of efficacy in price changes. The conclusion is that the BKB model is not relevant to Canada.

By using the macro-econometric input–output model INFORGE, this paper investigates the economic effects of a unilateral break-up of Germany from the European Monetary Union (EMU). The results show that a return to a national currency lowers Germany's growth path. Positive effects of a break-up due to lower domestic prices, increasing real wages and lower imports are fully compensated by the loss in international competitiveness. On industrial level, the negative implications are the strongest in those industries that depend strongly on exports. Strong indirect implications are expected for the business-related service sector. Although the results of this economic experiment depend strongly on its underlying assumptions, it can be shown that a break-up of the EMU would result in a heavy welfare loss for Germany. [ABSTRACT FROM PUBLISHER]

The article discusses tensions between Monetary and Financial Integration in the European monetary unit (EMU). Topics discussed include synergy between capital liberalisation and monetary union, argument of Germany defending the central rates for currencies against the German mark within the European Monetary System, and recognizing progress in economic convergence of weaker European economies by Germany.

The article discusses revolutionary changes in the international monetary system. Topics discussed include hovering of gold prices and the exchange-rates of all major currencies, exchange-rate readjustments of the franc and the mark and effect of the SDR agreement system on international monetary system.

This article deals with the use of the euro in international trade, particularly as a unit of account. It seeks to analyze the evolution of the single currency in its essential facet of international currency, especially in the academic sphere, by examining the ideas and assumptions made by economists prior to the launch of the euro, right up to today’s crisis. Although data regarding international trade invoicing are scarce, stylized facts reveal that the euro is a high and stable invoicing currency regionally, but not internationally. Indeed, the euro has failed to reach the status of vehicle currency: the euro is used only on specific markets where exporters are able to choose the currency of denomination. Moreover, since the euro was conceived in a neoclassical way, it is subject to institutional concerns, especially a lack of political support to foster a dynamics of internationalization. [ABSTRACT FROM PUBLISHER]

Copyright of Academic Review of Economics & Administrative Sciences is the property of Academic Review of Economics & Administrative Sciences and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of International Economics (2110-7017) is the property of Elsevier B.V. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates the bivariate dependence structure for three pairs of exchange rates measured against the US dollar: Euro and Japanese yen (JY), Euro and GBP, Euro and Swiss franc (CHF), in the pre-, post-Euro and the transition periods with the sample period ranging from January 1994 to November 2007. The Deutsche mark (DM) is used for the pre-Euro period. The novelty of the paper is that it employs non-parametric plots, which were derived based on the concept of copula, and a robust semi-parametric method to estimate copula models. The results indicate the changes in the dependence structure from the pre-Euro to the post-Euro period for the pairs DM (Euro)-JY, and DM (Euro)-GBP, with major changes occurring during the initial years of the launch of the Euro. For these two pairs of exchange rates, the model captures asymmetric tail dependence, implying different degrees of co-movements during appreciations and depreciations against the USD. The dependence between the Euro and the CHF remains unchanged, both in strength and structure, over the whole sample period, reflecting a marked tendency of the CHF to follow the fluctuations of the Euro against USD. There has been a tendency for the dependence between Euro and GBP to increase across the whole sample period. The results may be of interest for central banks, international trade, international portfolio diversification and currency risk management. Copyright © 2010 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper investigates the temporal stability of the relationship between the Deutschmark/US dollar exchange rate and macroeconomic fundamentals. We use monthly data from 1975:01 to 2007:12. Applying a novel time-varying coefficient estimation approach, we come up with some interesting properties of our empirical model. Firstly, there is no stable long-run equilibrium relationship among fundamentals and exchange rates, since the breakdown of Bretton Woods. Secondly, there are no recurring regimes, i.e. across different regimes, either the coefficient values for the same fundamentals differ or the significance differs. Thirdly, there is no regime into which no fundamentals enter. Fourthly, the deviations resulting from the stepwise cointegrating relationship act as a significant error-correction mechanism. In other words, we are able to show that fundamentals play an important role in determining the exchange rate, but their impact differs significantly across different subperiods. [ABSTRACT FROM AUTHOR]

An important puzzle in international finance is the failure of the forward exchange rate to be a rational forecast of the future spot rate. We document that even after accounting for nonstationarity, nonnormality, and heteroskedasticity using parametric and nonparametric tests on data for over a quarter century, U.S. dollar forward rates for the major currencies (the British pound, Japanese yen, Swiss franc, and the German mark) are generally not rational forecasts of future spot rates. These findings deepen the forward exchange rate bias puzzle, especially as these markets are the most liquid foreign exchange markets with very low trading costs. [ABSTRACT FROM AUTHOR]

In this paper, we test for structural changes in the conditional dependence of two-dimensional foreign exchange data. We show that by modeling the conditional dependence structure using copulae, we can detect changes in the dependence beyond linear correlation, such as changes in the tail of the joint distribution. This methodology is relevant for estimating risk-management measures, such as portfolio value-at-risk, pricing multi-name financial instruments, and portfolio asset allocation. Our results include evidence of the existence of changes in the correlation as well as in the fatness of the tail of the dependence between Deutsche mark and Japanese yen. [ABSTRACT FROM AUTHOR]

This paper proposes an arbitrage-free model to extract the information that the term structure of forward premia contains for forecasting future spot exchange rates. Using monthly data on four U.S. dollar bilateral exchange rates, we find evidence that this model provides statistically better forecasts than those produced by a random walk for the British pound and Canadian dollar exchange rates. Negative results for the German mark/Euro and Swiss franc are explained by a rejection of the restrictions imposed by the term structure model. [ABSTRACT FROM AUTHOR]

In this article we propose the generalized hyperbolic adaptive volatility (GHADA) risk management model based on the generalized hyperbolic (GH) distribution and on a nonparametric adaptive methodology. Compared with the normal distribution, the GH distribution has semi heavy tails and represents the financial risk factors more appropriately. Nonparametric adaptive methodology has the desirable property of being able to estimate homogeneous volatility over a short time interval and reflects a sudden change in the volatility process. For the German mark/U.S, dollar exchange rate and German bank portfolio data, the proposed GHADA model provides more accurate Value at risk calculations than the models with assumptions of the normal and t distributions. [ABSTRACT FROM AUTHOR]

The present research examined whether price trend misperceptions can be explained by the differential perception of increasing versus decreasing prices. We expected price increases (losses to consumers) to be perceived as being more intense than price decreases (gains to consumers) of the same magnitude. This tendency, in turn, should be positively associated with how people perceive the overall price trend. To test this reasoning, participants in the first two studies were asked to compare German Mark (DM) and Euro prices. First, participants received a menu containing 21 dishes with DM prices, and their price trend expectations were assessed. Then, participants indicated for each dish to what extent the price had changed. Finally, participants' overall price trend judgments were assessed. In both studies, results indicate that price trend judgments were biased toward rising prices. In addition, price increases were perceived as rising more than price decreases of the same magnitude were perceived as falling. This tendency was positively associated with overall price trend judgments, even after controlling for expectations. Study 3 was to replicate these findings in a different domain to demonstrate the general nature and impact of the hypothesized effect. Copyright © 2007 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

The objective of this article is to identify implicit bands for the Spanish peseta/Deutschmark exchange rate. To this end, based on the 'natural' classification approach suggested by Reinhart and Rogoff (2004), we propose a statistical test to assess the statistical significance of the outcome of their classifying algorithm. The test is applied to the period 1965-1998, indicating our results existence of fluctuation bands in the 1980s and 1990s, before and after the entry of the peseta into the European Monetary System. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates to what extent the expectations hypothesis of the term structure (EHTS) of interest rates receives some support since the launch of the European single currency. Empirical evidence shows that in general this theory applies to most European countries, and to Germany in particular. The objective of this paper thus is twofold. First, the EHTS for the German money market and for a larger sample including the German mark period and the euro money market is tested in order to check whether the results for the former are affected by the new financial environment since January 1999. Second, the implications of the results for the monetary policy assessment are discussed. We estimate cointegrating vector autoregressive models in order to quantify the level of the liquidity premium. The results suggest that financial markets do not consider the monetary policy of the European Central Bank simply as the one prevailing during the German period. [ABSTRACT FROM AUTHOR]

The article discusses the startling emergence of the Deutsche Mark (DM), the most stable German currency for more than a generation, from 1968-1969 wherein speculators and small savers across Western Europe raced to exchange their currencies for the Deutsche Mark in Germany. The reserves of West Germany's central bank, the Bundesbank, has increased by DM 9.4 million in the first three weeks of November 1968 with DM 7.3 billion arriving in just three days of trading. It also examines the learning curve of DM to give way to a more cooperative understanding of the international monetary system. However, the Social Democrats' vision prevailed the cost of awakening expectations among West German workers, which would not easily be satisfied.

In this paper we analyze microdata to explore differences in the rates at which American and German workers leave their salaried jobs to become self-employed. We document that the rate of self-employment is lower in Germany than in the United States, and the rate of transition from wage-earning to self-employment is lower as well. Our results suggest that German workers face liquidity constraints that are more severe than those of their American counterparts and an environment that discourages transitions to self-employment. The difference in transition rates cannot be attributed to observable differences between German and American workers. [ABSTRACT FROM AUTHOR]