This biennial report provides a quality review of the national balance of payments (b.o.p.), international investment position (i.i.p.) and international reserves template of the Eurosystem (international reserves), as well as the associated euro area aggregates.1 The report fulfils the formal...

This biennial report provides a quality review of the national balance of payments (b.o.p.), international investment position (i.i.p.) and international reserves template of the Eurosystem (international reserves), as well as the associated euro area aggregates.1 The report fulfils the formal...

The CFA franc devaluation on 11 January 1994 stands out as the most significant reform within the Franc Zone system since political independences of former African French colonies in 1960, yet a topic shrouded into profound taboo. So far, the economic literature has failed to draw any connection...

Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System, allowing us to pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor in...

This paper examines the role of ERM II in the convergence effort of the new Member States, against the background of past convergence experience and in the light of EU rules for economic and monetary policy. Key aspects of the mechanism are analysed, including the appropriate timing and duration...

Identifying exogenous variation in monetary policy is crucial for investigating central bank policy transmission. Using newly-collected archival real-time data utilized by the Central Bank Council of the German Bundesbank, we identify unexpected changes in German monetary policy from 580 policy...

The paper discusses what we have learned from last year's currency crises in ERM and the Nordic countries about fixed exchange rates as a means to achieve price stability. After discussing the explanations for the crises, the paper concludes that fixed exchange rates are not a shortcut to price...

Identifying exogenous variation in monetary policy is crucial for investigating central bank policy transmission. Using newly-collected archival real-time data utilized by the Central Bank Council of the German Bundesbank, we identify unexpected changes in German monetary policy from 580 policy...

In Indonesia, enterprise risk management (ERM) disclosure is mandatory and is expected to be substantial risk mitigation for investors. However, it becomes a question of whether the investors respond positively to ERM disclosure. ERM implementation requires the company's resources that should...

This paper examines the macroeconomic aftermath of the 1992 breakdown of the European Exchange Rate Mechanism (ERM). The economic performance of six leaver' nations is compared with five stayer' nations that maintained a roughly fixed parity with the Deutsche Mark. Recent writing about...

The goal of expanding participation in the European Banking Union was to allow the “outs” to enter into close cooperation, but it did not include the simultaneous joining of the Exchange Rate Mechanism (ERM II). Focusing on the cases of Bulgaria and Croatia, this paper attempts to respond to...

This paper reconsiders the 1992-3 crisis in the European Monetary System in light of its emerging market successors. That episode was a predecessor of the Mexican and Asian crises in the sense that both capital movements and domestic financial fragility placed important roles. The output effects...

The stability of the EMS depends crucially on realignment expectations of the market participants. In this paper we discuss how to measure such expectations and how to relate them to economic fundamentals, central bank reputation, and institutional arrangements of the EMS. We find the following...

Exchange rates of currencies in the Exchange Rate Mechanism of the EMS are characterized by long periods of stability interrupted by periods of extreme volatility. The periods of volatility appear at times of realignments of the central parities and at times when the exchange rate is within the...

The strategy for the adoption of the euro in the Czech Republic involves the entry of the Czech koruna into the ERM II mechanism for only the essential amount of time (approximately 2½ years). No date has yet been set for the introduction of the euro. The situation may, however, arise where it...

History provides us with many examples of multiple country fixed exchange rate regimes that have eventually fallen apart. In light of these failures, why has the EMS been so successful in stabilizing exchange rates among members, and in expanding its membership? This paper argues that one key...

Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System. Using this index, we pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor...

This paper applies a full-information technique to test for the presence of contagion across the money markets of ERM member countries. We show that whenever it is possible to estimate a model for interdependence, a test for contagion based on a full information technique is more powerful. We...

An empirical model of time-varying realignment risk in an exchange rate target zone is developed. Expected rates of devaluation are estimated as the difference between interest race differentials and estimated expected rates of depreciation within the exchange rate band, using French...

The euro zone as we know it must end or be radically reformedExecutive summary:– The UK decided not to join the euro on economic grounds. This was a decision which met with approval from the vast majority of UK liberal economists and which has been proved right by the course of events. Indeed,...

Empirical work on exchange-rate behavior under a target-zone regime has used data produced by the European Monetary System (ENS) and has found that the data contradict important predictions made by the standard target-zone model. We argue that the contradictions reflect a misinterpretation of...

Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System, allowing us to pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor in...

This paper investigates the relationship between inflation and inflation uncertainty in twelve EMU countries. A time-varying GARCH model is estimated to distinguish between short-run and steady-state inflation uncertainty. The effects of the introduction of the Euro in 1999 are then examined...

In view of the requirements of Stage 2 of European Monetary Union (EMU) for accession to the European Union, this paper examines the desirability for, and the ability of, the lead candidates in Central and Eastern Europe to participate in the new exchange rate mechanism (ERM2) and eventually in...

This paper reviews recent advances in the specification and estimation of Bayesian Vector Autoregressive models (BVARs). After describing the Bayesian principle of estimation, we first present the methodology originally developed by Litterman (1986) and Doan et al. (1984) and review alternative...

Estimation and simulation of sustainable real exchange rates in some of the new EU accession countries point to potential difficulties in sustaining the ERM2 regime if entered too soon and with weak policies. According to the estimates, the Czech, Hungarian, and Polish currencies were overvalued...

This paper reviews the strategies announced by the ten countries joining the European Union in May 2004 with regard to their intentions for participation in ERM II and the adoption of the euro. The paper examines the economic rationale of the monetary integration strategies declared by most...

This essay deals with the EMS experience and its failure, with the Maastricht Treaty, and with the interregnum leading to the formation of the EMU in 1999. The paper highlights the position of German authorities, showing that they were quite lucid about the fundamental weaknesses inherent in a...

This study first assesses recent misalignments of the real effective exchange rate (REER) of the euro area and of the Harmonized Competitiveness Indicators (HCIs) of its main economies, based on a quarterly Behavioural Equilibrium Exchange Rate (BEER) model. Next, it draws a comparison with...

This paper aims at investigating the behaviour of risk premia of currencies participating in the European Monetary System (EMS) aginst the dollar. For this purpose a multivariate GARCH-in-mean model is specified, allowing the risk premia of EMS currencies other than the deutschmark to be...