The Stabilizing Effect of the ERMon Exchange Rates and Interest Rates : An Empirical Investigation

Author/Editor:

Michael J. Artis ; Mark P. Taylor

Publication Date:

August 1, 1993

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:

This paper applies nonparametric test procedures to test for a shift in the volatility of nominal and real exchange rates for ERM members and nonmembers. The results imply a reduction in volatility for the ERM members, especially during the second half of the period of operation of the ERM. We also demonstrate that this enhanced stability was not bought at the expense of increased interest rate volatility. The issue of interest rate volatility during sterling’s participation in the ERM is also examined.

Series:

Working Paper No. 93/67

Notes:

Also published in Staff Papers, Vol. 41, No. 1, March 1994.

English

Publication Date:

August 1, 1993

ISBN/ISSN:

9781451848854/1018-5941

Stock No:

WPIEA0671993

Format:

Paper

Pages:

30

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