Please use this identifier to cite or link to this item: http://hdl.handle.net/10316/13320
Title: Exchange Rate Mean Reversion within a Target Zone: Evidence from a Country on the Periphery of the ERM
Authors: Duarte, António Portugal 
Andrade, João Sousa 
Duarte, Adelaide 
Keywords: Martingale difference sequence; Mean reversion; Stationarity; Target zones; Unit roots
Issue Date: 2009
Publisher: FEUC. Grupo de Estudos Monetários e Financeiros
Keywords: Martingale difference sequence; Mean reversion; Stationarity; Target zones; Unit roots
Issue Date: 2009
Publisher: FEUC. Grupo de Estudos Monetários e Financeiros
Citation: Estudos do GEMF. 15 (2009)
Abstract: The aim of this study is to assess to what extent the Portuguese participation in the European Monetary System (EMS) has been characterized by mean reverting behaviour, as predicted by the exchange rate target zone model developed by Krugman (1991). For this purpose, a new class of mean reversion tests is introduced. The empirical analysis of mean reversion in the Portuguese exchange rate shows that most of the traditional unit root and stationarity tests point to the nonstationarity of the exchange rate within the band. However, using a set of variance-ratio tests, it was possible to detect the presence of a martingale difference sequence. This suggests that the Portuguese foreign exchange market has functioned efficiently, allowing us to conclude that the adoption of an exchange rate target zone regime has contributed decisively to the creation of the macroeconomic stability conditions necessary for the participation of Portugal in the euro area
URI: http://hdl.handle.net/10316/13320
Rights: openAccess
Appears in Collections:FEUC- Vários

Files in This Item:
File Description SizeFormat
Exchange Rate Mean Reversion within a Target Zone.pdf336.18 kBAdobe PDFView/Open
Show full item record

Page view(s) 50

376
checked on Aug 14, 2019

Download(s) 50

225
checked on Aug 14, 2019

Google ScholarTM

Check


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.