Francisco J. Ledesma Rodríguez

The Credibility of the European Monetary System: A Review

The paper presents an overview of several studies about the credibility of the European Monetary System (EMS). These studies compare different credibility indicators in terms of their ability to detect exchange rate crises in a target zone. Marginal credibility seems to be the best measure for capturing the main events. The credibility indices are also applied to the first years of the current ERM-II. The history of the EMS suggests that, in an environment of financial deregulation and high capital flows, such an exchange rate system can only operate as a temporary regime that is moving towards a full monetary union, since it may be too fragile as a permanent monetary regime.

Implicit Regimes for the Spanish Peseta/Deutschmark Exchange Rate

The objective of this paper is to identify implicit exchange rate regimes for the Spanish peseta/Deutschmark exchange rate. To this end, several statistical approaches, proposed by previous studies, are applied to the period 1965-1998. The results indicate the existence of implicit regimes other than a free-floating one.

On Crises, International Trade and Exchange Rate Regimes

The main objective of this paper is to study the performance of exchange rate regimes on international trade during crisis episodes. To that end, a gravity equation is estimated for a sample of 194 countries over the period 1970-2011, by adding a set of regressors built from a de facto classification of exchange rate arrangements and the dates of recognized financial crises. This paper studies the behaviour of the different exchange rate regimes in the context of both global and domestic economic crises. The results indicate that sharing a common currency seems to be the best exchange rate arrangements in terms of its effect on trade during crisis episodes. The results also suggest that the fixer the regime is, the more intense is its promoting impact on trade during crises.

Further Evidence on Implicit Bands in the Yen/Dollar Exchange Rate

This paper attempts to identify implicit exchange rate regimes for the Yen/Dollar exchange rate. To that end, we apply a sequential procedure that considers both the dynamics of exchange rates and central bank interventions to data covering the period from 1971 to 2003. Our results would suggest that implicit bands existed in two subperiods: April-December 1980 and March-December 1987, the latter coinciding with the Louvre Accord. Furthermore, the study of the credibility of such implicit bands indicates the high degree of confidence attributed by economic agents to the evolution of the Yen/Dollar exchange rate within the detected implicit band rate, thus lending further support to the relevance of such implicit bands.

Regímenes cambiarios "de iure y de facto". El caso de la peseta/dólar, 1965-1998

In this paper we apply three different statistical procedures to the peseta/dollar exchange rate with the objective of discovering the true foreign exchange regime followed by the monetary authorities during the 1965-1998 period. The study´s perspective emphasizes the divergence between de jure and de facto exchange regimes. The results seem to imply that the peseta, as well as other currencies, did not exhibit the floating regime that de jure had in relation to the US dollar in the last three decades of its existence. On the contrary, the peseta/dollar exchange rate moved within rather narrow fluctuation bands during those years.

Implicit Bands in the Yen/Dollar Exchange Rate

This paper attempts to identify implicit exchange rate regimes for the Yen/Dollar exchange rate. To that end, we apply a sequential procedure that considers both the dynamics of exchange rates and central bank interventions to data covering the period from 1971 to 2003. Our results would suggest that implicit bands existed in two subperiods: April-December 1980 and March-December 1987, the latter coinciding with the Louvre Accord. Furthermore, the study of the credibility of such implicit bands indicates the high degree of confidence attributed by economic agents to the evolution of the the Yen/Dollar exchange rate within the detected implicit band rate, thus lending further support to the relevance of such implicit bands.This paper attempts to identify implicit exchange rate regimes for the Yen/Dollar exchange rate. To that end, we apply a sequential procedure that considers both the dynamics of exchange rates and central bank interventions to data covering the period from 1971 to 2003. Our results would suggest that implicit bands existed in two subperiods: April-December 1980 and March-December 1987, the latter coinciding with the Louvre Accord. Furthermore, the study of the credibility of such implicit bands indicates the high degree of confidence attributed by economic agents to the evolution of the the Yen/Dollar exchange rate within the detected implicit band rate, thus lending further support to the relevance of such implicit bands.

Assessing the Credibility of a Target Zone: Evidence from the EMS

This paper provides some new evidence on the credibility of the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS). We differ from previous studies in the literature in three main respects. First, our main contribution is the use of several credibility indicators, some of which have never been applied before to all of the currencies under study. This allows us to strengthen the results obtained in this paper. Second, we analyse a longer period than that of previous studies, covering the complete EMS history. Third, we have carried out a comparison of the prediction qualities of the different indicators, in order to explore their ability to capture the main ERM events (realignments, changes in the fluctuations bands and speculative pressures). Fourth, we apply the indicators to the experience of the new, modified ERM linking the currencies of non-euro area Member States to the euro, showing the relevance of this approach in the near future with the enlargement of the European Union.