Abstract
Realignment expectations are analyzed for European exchange rates using daily financial data since the inception of the European Monetary System. It is difficult to find strong meaningful relationships between realignment expectations and macroeconomic variables, although there are linkages between realignment expectations and inflation differentials. It is also hard to find strong signs that political events consistently affect realignment expectations. For instance, the political uncertainties associated with the 1992 Danish referendum on the Maastricht treaty do not appear to have had a strong affect on realignment expectations. Indeed, there were few indications of poor Exchange Rate Mechanism credibility before late August 1992; the dimensions of the currency crisis of September 1992 appear to have taken both policymakers and private agents largely by surprise.
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Rose, A.K., Svensson, L.E.O. (1995). Macroeconomic and Political Determinants of Realignment Expectations: Some European Evidence. In: Eichengreen, B., Frieden, J., von Hagen, J. (eds) Monetary and Fiscal Policy in an Integrated Europe. European and Transatlantic Studies. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-79817-7_5
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DOI: https://doi.org/10.1007/978-3-642-79817-7_5
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