Exchange Rate Dynamics in Anticipation of Time-Contingent Regime Switching : Modelling the Effects of a Possible Delay

The procedure of fixing a currently floating exchange rate at a given (and publicly announced) future date has a broad range of applications. Based on a (continuous-time) monetary exchange rate model with flexible prices, this paper analyzes exchange rate dynamics during the transition from floating to fixed rates in a situation in which market participants are uncertain about adherence to the fixing date and in which they take account of a possible delay in the regime switch. The closed-form solutions derived here allow us to quantify announcement effects as well as effects on the exchange rate variance caused by news that significantly changes the market's assessment of uncertainty

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Year of publication:	2017
Authors:	Wilfling, Bernd
Other Persons:	Maennig, Wolfgang (contributor)
Publisher:	[2017]: [S.l.] : SSRN
Subject:	Theorie \| Theory \| Wechselkurs \| Exchange rate \| Wechselkurspolitik \| Exchange rate policy \| Wechselkurssystem \| Exchange rate regime \| Flexibler Wechselkurs \| Flexible exchange rate \| Monetäre Wechselkurstheorie \| Monetary approach to exchange rates \| Fester Wechselkurs \| Fixed exchange rate \| Stochastischer Prozess \| Stochastic process
Description of contents:	Abstract [papers.ssrn.com]