In this paper we examine the nature of currency crises. We ascertain whether the currency crises of the European Monetary System (EMS) were based either on fundamentals, or on self-fulfilling market expectations driven by extrinsic uncertainty. In particular, we extend previous work of Jeanne and Masson (J Int Econ 50:327–350, 2000) regarding the evaluation of currency crisis. We contribute to the existing literature proposing the use of Markov regime-switching with time-varying transition probability model. Our empirical results suggest that the currency crises of the EMS were not due only to market expectations driven by external uncertainty, or ‘sunspots’, but also to fundamental variables that help to explain the behavior of market expectations

Evaluating currency crises: the case of the European monetary system / Cipollini, Andrea; Mouratidis, K; Spagnolo, N.. - In: EMPIRICAL ECONOMICS. - ISSN 0377-7332. - STAMPA. - 35(1):(2008), pp. 11-27. [10.1007/s00181-007-0141-6]

Evaluating currency crises: the case of the European monetary system

CIPOLLINI, Andrea;
2008

Abstract

In this paper we examine the nature of currency crises. We ascertain whether the currency crises of the European Monetary System (EMS) were based either on fundamentals, or on self-fulfilling market expectations driven by extrinsic uncertainty. In particular, we extend previous work of Jeanne and Masson (J Int Econ 50:327–350, 2000) regarding the evaluation of currency crisis. We contribute to the existing literature proposing the use of Markov regime-switching with time-varying transition probability model. Our empirical results suggest that the currency crises of the EMS were not due only to market expectations driven by external uncertainty, or ‘sunspots’, but also to fundamental variables that help to explain the behavior of market expectations
2008
35(1)
11
27
Evaluating currency crises: the case of the European monetary system / Cipollini, Andrea; Mouratidis, K; Spagnolo, N.. - In: EMPIRICAL ECONOMICS. - ISSN 0377-7332. - STAMPA. - 35(1):(2008), pp. 11-27. [10.1007/s00181-007-0141-6]
Cipollini, Andrea; Mouratidis, K; Spagnolo, N.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/608707
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