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Empirical Features of the Second-Generation Target Zone Models: Mean-Reverting Fundamentals and...
- Source :
-
Economic Inquiry . Jul99, Vol. 37 Issue 3, p489. 21p. 4 Charts, 6 Graphs. - Publication Year :
- 1999
-
Abstract
- We show that within Bertola and Svensson's second-generation target zone model, mean-reverting interventions and endogenous devaluation risk are closely interrelated. Over the period 1983-93 we analyze the degree of mean reversion in the underlying fundamental process as well as the term structure of interest rate differentials vis-a-vis Germany for six Exchange Rate Mechanism currencies. For Austria, Denmark and the Netherlands, and for Belgium after 1990 our estimates are broadly in line with the first-generation target zone model, whereas those for France and Italy are in accordance with the model that allows for endogenous devaluation risk. (JEL F31, E43) [ABSTRACT FROM AUTHOR]
- Subjects :
- *FOREIGN exchange rates
*INTEREST rates
*MONEY
Subjects
Details
- Language :
- English
- ISSN :
- 00952583
- Volume :
- 37
- Issue :
- 3
- Database :
- Academic Search Index
- Journal :
- Economic Inquiry
- Publication Type :
- Academic Journal
- Accession number :
- 2212785
- Full Text :
- https://doi.org/10.1111/j.1465-7295.1999.tb01444.x