Tests for Nonlinearity in EMS Exchange Rates

Vilasuso, Jon; Cunningham, Steve

doi:10.2202/1558-3708.1019

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Nonlinearities In the Exchange Rate Function1

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Cited by 4 publications

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“…In this sense, Vilasuso and Cunningham [41] test for nonlinearities using the bispectrum. They find that the Belgian Franc, the Danish Krona, the Dutch Guilder and the French Franc follow a linear process over the period 1979-1987, when several realignments took place.…”

Section: Nonlinearities In the Exchange Rate Functionmentioning

confidence: 99%

The Optimal Degree of Exchange Rate Flexibility: a Target Zone Approach*

López

Mendizábal

2007

Rev International Economics

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This paper presents a benchmark model that rationalizes the choice of the degree of exchange rate flexibility. We show that the monetary authority may gain efficiency by reducing volatility of both the exchange rate and the interest rate at the same time. Furthermore, the model is consistent with some known stylized facts in the empirical literature on target zones that previous models were not able to generate jointly, namely, the positive relation between the exchange rate and the interest rate differential, the degree of non-linearity of the function linking the exchage rate to fundamentals and the shape of the exchange rate stochastic distribution.

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Section: Nonlinearities In the Exchange Rate Functionmentioning

confidence: 99%