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Andrew J Patton - One of the best experts on this subject based on the ideXlab platform.
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multivariate garch modeling of exchange rate volatility transmission in the European Monetary System
The Financial Review, 2000Co-Authors: Colm Kearney, Andrew J PattonAbstract:We construct a series of 3-, 4- and 5-variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979-March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission. Copyright 2000 by MIT Press.
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multivariate garch modeling of exchange rate volatility transmission in the European Monetary System
Social Science Research Network, 2000Co-Authors: Colm Kearney, Andrew J PattonAbstract:We construct a series of 3-, 4- and 5-variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979?March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission.
Colm Kearney - One of the best experts on this subject based on the ideXlab platform.
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multivariate garch modeling of exchange rate volatility transmission in the European Monetary System
The Financial Review, 2000Co-Authors: Colm Kearney, Andrew J PattonAbstract:We construct a series of 3-, 4- and 5-variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979-March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission. Copyright 2000 by MIT Press.
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multivariate garch modeling of exchange rate volatility transmission in the European Monetary System
Social Science Research Network, 2000Co-Authors: Colm Kearney, Andrew J PattonAbstract:We construct a series of 3-, 4- and 5-variable multivariate GARCH models of exchange rate volatility transmission across the important European Monetary System (EMS) currencies including the French franc, the German mark, the Italian lira, and the European Currency Unit. The models are estimated without imposing the common restriction of constant correlation on both daily and weekly data from April 1979?March 1997. Our results indicate the importance of checking for specification robustness in multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) modeling, we find that increased temporal aggregation reduces observed volatility transmission, and that the mark plays a dominant position in terms of volatility transmission.
Jilleen R Westbrook - One of the best experts on this subject based on the ideXlab platform.
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Monetary integration inflation convergence and output shocks in the European Monetary System
Social Science Research Network, 1998Co-Authors: Jilleen R WestbrookAbstract:Studies on Monetary convergence in Europe have reached mixed conclusions, raising questions about whether the European Monetary System failed to expedite convergence, or whether convergence requires redefining. A definition of convergence is explored that conditions Monetary policy on factors affecting real exchange rates. Inflation rates have converged, while unconditional Monetary policies have not. Once conditioning factors are considered, much of the gap between inflation and Monetary convergence is explained. Differences in output trends do not explain the gap, while velocity variability does.
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Monetary integration inflation convergence and output shocks in the European Monetary System
Economic Inquiry, 1998Co-Authors: Jilleen R WestbrookAbstract:I. INTRODUCTION The Maastricht treaty of 1992 outlines a plan for the Economic and Monetary Union (EMU) of members of the European Monetary System (EMS). The treaty provides for a European central bank, and ultimately a single Monetary unit. As a preliminary to a single currency, the EMS established a System of fixed exchange rates among its members. Over the long run, for such a fixed exchange rate regime to be sustainable - and a single currency feasible - the Monetary policies of the members cannot be highly divergent. Thus, the treaty requires policy convergence - loosely defined as Monetary convergence - from the EMS's members before preceding to Monetary union. However, the precise conditions for successful "convergence" are not so clear. As MacDonald and Taylor [1991] point out, a successful EMS requires Monetary policy coordination among its member states if balance of payments and competitiveness problems resulting from disequilibrium real exchange rates are to be avoided. Yet, empirical studies of whether the members of the EMS have achieved Monetary convergence have reached mixed conclusions (Hafer and Kutan [1994] and MacDonald and Taylor [1991]). This evidence raises questions about whether the EMS has failed to bring about a high degree of Monetary convergence, or whether the definition of Monetary convergence used in these studies requires refinement. Monetary policies cannot diverge much in a successful Monetary union. However, the precise policies needed for success depend upon balance of payments considerations. Convergence in a fixed exchange rate System is ultimately defined by balance of payments equilibrium. We often think of balance of payments equilibrium in terms of inflation convergence; and the Maastricht criteria define convergence as such.(1) When inflation differentials are very large, Monetary and inflation convergence will largely coincide, but when inflation differentials are more moderate, inflation convergence may require that Monetary growth rates diverge slightly, depending upon differences in output growth, velocity, or shifts in preferences for tradeable goods. The purpose of this paper is to explore whether inflation convergence in the EMS interfered with the goal of Monetary convergence, given different trends in output and velocity across member countries. The evidence reported here shows that in a core group of EMS countries inflation rates have converged, but Monetary aggregates have not. One reason for the differences in the results of tests of Monetary convergence in the EMS is that researchers have failed to condition their tests for Monetary convergence upon the appropriate factors.(2) For example, according to a Monetary model of the balance of payments, tests of Monetary convergence should account for differences in output trends. Velocity differences are important conditioning factors as well. The evidence presented here shows that trends in velocity help explain the lack of Monetary convergence in the EMS, while different output trends do not. II. DEFINITIONS OF Monetary CONVERGENCE Previous studies have defined Monetary convergence as the cointegration of similar Monetary policy variables (reserve money or interest rates), based upon maximum likelihood estimation techniques developed by Johansen and Juselius [1990]. MacDonald and Taylor [1991] argue that fewer than five different trends in Monetary aggregates for a sample of five countries reflects "long run convergence." Thus, according to MacDonald and Taylor, if five countries show evidence of four or fewer trends in money growth, long-run convergence has occurred. Hafer and Kutan [1994] improve upon MacDonald and Taylor's definition by distinguishing partial Monetary convergence from full Monetary convergence. Partial convergence means that time-series data for five countries would show fewer than five trends in Monetary aggregates, but full convergence is defined as one common trend for all five countries in Monetary aggregates. …
Cristina Bodea - One of the best experts on this subject based on the ideXlab platform.
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fixed exchange rates with escape clauses the political determinants of the European Monetary System realignments
Social Science Research Network, 2015Co-Authors: Cristina BodeaAbstract:This paper studies the political economy of realignments to fixed exchange rates and suggests that the use of realignments is less likely when there are political benefits from stable exchange rates and when linkages across other issue areas increase the costs of realignment. More specifically for the case of the European Monetary System (EMS), the expectation is that realignments are related to partisanship, support for the broader European integration, trade integration, resource transfers from the European Community, as well as countries reacting to the political and economic costs of realignment in other EMS members. Hypotheses are tested using binomial logit models on monthly data on exchange rate realignments for all EMS countries from 1979 to 1993. I find lower realignment risk for left wing policy-makers and countries with more trade links to Germany, whereas more intra-European Community resource transfers appear to go to countries facing higher realignment risk. Also, realignments are less likely when the rest of EMS member countries have stable international reserves and their governments are pro-European.
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who invokes the escape clause the political determinants of the European Monetary System realignments
Social Science Research Network, 2011Co-Authors: Cristina BodeaAbstract:The European Monetary System (EMS) was set up in 1979 as a step in the Monetary integration of the European Community. At its core, the EMS worked as fixed but adjustable exchange rates and, despite its success in retaining country membership, it experienced a series of currency realignments against the German currency. This paper links the use of realignments to escape clauses in a Monetary cooperation agreement and derives hypotheses about who and when is more likely to invoke such clauses. I argue that realignment behaviour is driven by credibility considerations for domestic Monetary policy; implications for European trade; the institutional structure of the EMS and its centrality to the larger process of European integration; as well as the behaviors of the core nations – Germany and France. Using monthly data on exchange rate realignments for all EMS members from 1979 to 1993, I find strong support for the hypotheses.
Hyoung-kyu Chey - One of the best experts on this subject based on the ideXlab platform.
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Can the European Monetary System be a model for East Asian Monetary cooperation
Journal of the Asia Pacific Economy, 2010Co-Authors: Hyoung-kyu CheyAbstract:Since the 1997 Asian financial crisis and the launch of the European Economic and Monetary Union shortly afterward, a growing number of studies have considered the idea of a so-called Asian Monetary System, mostly adopting the European Monetary System as its model. The operational adjustment burdens in the European Monetary System were asymmetrically distributed, however, in particular between Germany and the other member countries. The emulation of such an asymmetric System in East Asia is not likely to be sustainable, due to the much lower support for regional integration there than was the case in Europe. For a future Asian Monetary System to be sustainable, it should be designed in such a way as to promote symmetry in the adjustment burdens arising from its operation. To this end, it may be desirable for the Asian Monetary System to employ an exchange rate and intervention mechanism that levies adjustment burdens largely on participant currencies deviating substantially from the average member currenc...
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can the European Monetary System be a model for east asian Monetary cooperation
Social Science Research Network, 2009Co-Authors: Hyoung-kyu CheyAbstract:Since the 1997 Asian financial crisis and the launch of the European Economic and Monetary Union shortly afterward, a growing number of studies have considered the idea of a so-called Asian Monetary System, mostly adopting the European Monetary System as its model. The operational adjustment burdens in the European Monetary System were asymmetrically distributed, however, in particular between Germany and the other member countries. The emulation of such an asymmetric System in East Asia is not likely to be sustainable, due to the much lower support for regional integration there than was the case in Europe. In order for a future Asian Monetary System to be sustainable, it should be designed in such a way as to promote symmetry in the adjustment burdens arising from its operation. To this end, it may be desirable for the Asian Monetary System to employ an exchange rate and intervention mechanism that levies adjustment burdens largely on participant currencies deviating substantially from the average member currency movements. This mechanism should also be constructed in such a way that each currency’s probability of identification as a deviant currency is similar.
