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Alternative Approaches to Evaluate Exchange Rate Credibility: A Selective Survey of the Literature and Some Policy Implications for the European Monetary

Author

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  • Tronzano , Marco

    (Università degli Studi di Genova, Dipartimento di Economia e Metodi Quantitativi)

Abstract

This paper provides a selective survey of some recent literature assessing exchange rate credibility through bayesian or nonhinear econometrjc frameworks. The empirical evidence from this literature suggests two main conclusions: one in retrospect, concerning the past experience of France in the EMS, and one in prospect, with reference to some policy implications for the future of EMU. As regards the former aspect, the paper stresses that, differently from a widespread view in the EMS literature, speculative attacks against the French Franc in 1992-93 can be explained, to a large extent, by imbalances in macroeconomic fundamentals. Turning to the latter conclusion, it is argued that, quite independently of negative spili-over effects induced by profligate fiscal policies, a reversal in the recent trend of the French debt/GDP ratio will be important, in the years ahead, to enhance EMU credibility and long run viability.

Suggested Citation

  • Tronzano , Marco, 2001. "Alternative Approaches to Evaluate Exchange Rate Credibility: A Selective Survey of the Literature and Some Policy Implications for the European Monetary," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 54(1), pages 57-88.
    • Handle: RePEc:ris:ecoint:0226
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    Cited by:

    1. Pompeo Della Posta, 2002. "Modelli di crisi valutarie e misure di politica economica," Moneta e Credito, Economia civile, vol. 55(219), pages 237-262.

    More about this item

    Keywords

    Speculative Attacks; Multiple Equilibria; Credibility; France; EMS; EMU.;
    All these keywords.

    JEL classification:

    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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