Inflation-targeting central banks often explicitly reserve the right to intervene in foreign exchange markets when the exchange rate 'deviates from fundamentals' and/or 'displays excessive volatility'. In the case of emerging markets, central banks can often ill afford to neglect exchange rate...

In this paper we analyse the behaviour of the bilateral exchange rates that were converted into euros on 1 January 1999. Using a model of stochastic regime switching we study the effects of future conversion on current exchange-rate dynamics. We find that exchange rates are to a large extent...

This paper studies the relationship between the probability of devaluation of the Brazilian real and the fundamentals of the economy for the period 1995-8. We use a model of a fixed exchange rate system that allows for multiple equilibria and, therefore, makes possible the identification of...