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Crises and Credibility in a Target Zone: A Logit from a Markov-Switching Model

Author

Listed:
  • M. Isabel Campos

    (University of Valladolid)

  • M. Araceli Rodríguez

    (University of Valladolid)

Abstract
The 90’s could be characterized as a time in which both developed and emerging countries have su¤ered important episodes of exchange rate instability; some of these periods have resulted in exchange rate devaluations and others, in important exchange rate depreciations. We are interested in the knowledge and explanation of such moments of turbulence in order to avoid or even forecast future crises. This paper focuses on the study of the di¤erent moments of speculative pressure in Europe and particularly on the Spanish peseta during the target zone period. We use a Binary Dependent Variable Model (Logit Method) to estimate the readjustment probability in a target zone. Our dependent variable is calculated from a Markov-Switching model on the Spanish-German interest rate di¤erential. We show that this methodology is appropriate.

Suggested Citation

  • M. Isabel Campos & M. Araceli Rodríguez, 2000. "Crises and Credibility in a Target Zone: A Logit from a Markov-Switching Model," Working Papers 00-05, Asociación Española de Economía y Finanzas Internacionales.
    • Handle: RePEc:aee:wpaper:0005
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    References listed on IDEAS

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    Cited by:

    1. Rodríguez López, Mª A., 2002. "Crisis de credibilidad de la peseta en las bandas del SME. Una aplicación del Modelo de Markov con saltos de régimen," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 20, pages 599-626, Diciembre.
    2. Morales Vásquez, Daniel, 2011. "Presiones cambiarias en el Perú: Un enfoque no lineal," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 20, pages 57-71.

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    More about this item

    Keywords

    Target Zones; Markov-Switching Models; Currency Crises; Readjustment Probability;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance

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