Abstract
paper documents econometrically the trend toward financial and monetary integration among the countries of the EMS. first half of the paper examines return differentials among European countries. Short-term nominal interest differentials have fallen. What is the role of county factors (e.g., capital controls) versus currency factors (e.g., exchange risk premia)? To find out, we look directly at covered interest differentials, measured with the aid of forward rate data, and exchange risk premia, measured with the aid of survey data on exchange rate expectations. second half of the paper examines the credibility of the EMS, essentially updating the results and condensing the presentation in The European Monetary System: Credible at Last? We find evidence that the danger of realignment perceived by investors was lower in 1990-91 than previously. overall conclusion is that all components of the interest differential fell during the course of the 1980s.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.