The Credibility of Nordic Exchange Rate Bands: 1987-1991

By Sami Geadah, Lars E. O. Svensson, Tapio Saavalainen

January 1, 1992

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Sami Geadah, Lars E. O. Svensson, and Tapio Saavalainen. The Credibility of Nordic Exchange Rate Bands: 1987-1991, (USA: International Monetary Fund, 1992) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The credibility of the exchange rate bands in the Nordic countries during 1987-91 is examined with two tests. The results suggest that the credibility of Finland’s exchange rate band within a twelve-month horizon could not be rejected except in the fall of 1991; however, the band lacked credibility within a five-year horizon throughout the period. Denmark’s and Norway’s bands lacked both short- and long-term credibility at the beginning of the period, but credibility could not be rejected from 1989 for Norway and as of 1990 for Denmark. The credibility of Sweden’s band within a one-year horizon could not be rejected up to fall 1989, but thereafter its credibility deteriorated sharply.

Subject: Central banks, Crawling peg, Exchange rates, Financial services, Foreign exchange, Forward exchange rates, Interest rate parity, International reserves

Keywords: Band of Denmark, Crawling peg, Exchange rate band, Exchange rate credibility, Exchange rate expectation, Exchange rate target, Exchange rates, Forward exchange rate, Forward exchange rates, Interest rate parity, International reserves, Middle East, Rate-of-return band, Risk premium, WP

Publication Details

Pages:

24
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/003
Stock No:

WPIEA0031992
ISBN:

9781451841817
ISSN:

1018-5941

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