both decreasing in the time to maturity. Devaluation/realignment risks are incorporated and imply upward shifts of the …

The foreign exchange risk premium in an exchange rate target-zone regime with devaluation/realignment risks is derived … devaluation/realignment risk, is taken into account. The risk premium is then the sum of two separate risk premia, arising from …/realignments are larger but still relatively small proportions of the expected rate of devaluation/realignment. …

The paper presents estimates of devaluation expectations for six EMS currencies relative to the Deutschmark, for the …

financial data since the inception of the EMS. It is difficult to find economically meaningful relationships between realignment …Realignment expectations which measure exchange rate credibility are analysed for European exchange rates using daily … movements to realignment expectations are common to ERM participants. There were few indications of poor ERM credibility before …

The stability of the EMS depends crucially on the realignment expectations of market participants. In this paper we … institutional arrangements of the EMS. We find the following empirical regularities for FF/DM and IL/DM exchange rates: (1) expected … negatively related to the length of time since last realignment in the short and medium run; (3) the Basle-Nyborg agreements seem …

rules in practice. An EMS-type institution which presumably imposes a political cost on policy-makers who realign may lead … irrevocably fixed exchange rate. Countries can suffer periods in which no realignment occurs, yet unemployment, real wages, and ex …

realignment. …

An empirical model of time-varying realignment in an exchange rate target zone is developed. Expected rates of …

We examine the effects of endogenously determined realignment expectations in a model of a target zone with sluggish … strongly skewed conditional distributions for the nominal exchange rate, thus generating pressures for realignment. We show … that variable realignment expectations impose tight limits on the width of a sustainable band. If realignment expectations …

System (EMS), with several authors reporting that exchange rate data for the EMS do not display this feature, but in contrast … cluster towards the middle of the band. We show that such findings result from neglect of the multi-currency nature of the EMS … and are overturned when account is taken of the full set of intervention obligations. …