Francisco Ledesma Rodríguez, Manuel Navarro Ibáñez, Jorge Pérez Rodríguez, S. Sosvilla‐Rivero
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引用次数: 23
Abstract
In this paper we present new insights in the literature on the credibility of the Irish pound in the European Monetary System (EMS), adding value to the previous research, which has focused either on the correlation between Irish interest rates and Irish Pound/Pound Sterling exchange rate (therefore examining the credibility in an indirect way) or on the traditional credibility indicators. In contrast, we try to provide some additional evidence making use of a wider set of credibility indicators, including the marginal credibility that has not been examined before for the Irish case. At the same time, we extend the analysis by considering in our sample the more recent events in the EMS history, particularly the broadening of fluctuation bands in 1993. Our results suggest credibility gains (i) after the realignments of the Irish pound on 4 August 1986, on 12 January 1987 and on 1 February 1993; (ii) after the broadening of the fluctuation bands to ? 15% on 2 August 1993; and (iii) around the devaluation of the Spanish peseta and the Portuguese escudo on 6 March 1995. On the other hand, we detect some occasional reductions in credibility, notably before the monetary turmoil registered in September 1992 and after the Italian lira rejoined the Exchange Rate Mechanism on 25 November 1996. Finally, it is interesting to note that our results suggest that the marginal credibility measure seems to be the best credibility indicator to capture the main events of the sample period. Therefore, the use of an econometric technique that allows the parameters to change along time is quite appropriate for the study of credibility in a target zone (i.e., stabilizing interventions by the central banks, speculative movements by private agents, and realignments modify the parameters of the process along the period studied), justifying further the contribution of our paper.
期刊介绍:
The Economic and Social Review is Ireland''s leading journal for economics and applied social science. The Journal is published four times a year. The ESR invites high quality submissions in economics, sociology, and cognate disciplines on topics of relevance to Ireland. Contributions based on original empirical research and employing a comparative international approach are particularly encouraged. The ESR incorporates a policy section that contains applied articles addressing important questions relating to economic and social policy. While these articles do not necessarily have to contain new academic research results, they are subject to the same refereeing process as our academic articles. Suggestions to the Editor for specially themed policy sections are welcome.