The Credibility of CIS Exchange Rate Policies: A Technical Trader's View

32 Pages Posted: 27 Dec 2007

See all articles by Bernhard Herz

Bernhard Herz

University of Bayreuth

Christian Bauer

University of Trier; Universität Trier

Date Written: October 2004

Abstract

Stabilizing the exchange rate is a major monetary policy goal in a number of CIS countries. We present a microstructure model of the foreign exchange market based on technical trading that allows us to categorize the de facto exchange rate regimes and derive a market based measure of the credibility of these exchange rate regimes. In our empirical analysis we compare the exchange rate policies of Belarus, Kazakhstan, Russia and Ukraine with the benchmark of three potential candidates for an EU accession, namely Bulgaria, Romania and Turkey. Our results indicate that markets assign a relatively high degree of credibility to the exchange rate management of the CIS countries. The paths to credibility, however, were quite different. Stabilizing the exchange rate is a major monetary policy goal in a number of CIS countries. We present a microstructure model of the foreign exchange market based on technical trading that allows us to categorize the de facto exchange rate regimes and derive a market based measure of the credibility of these exchange rate regimes. In our empirical analysis we compare the exchange rate policies of Belarus, Kazakhstan, Russia and Ukraine with the benchmark of three potential candidates for an EU accession, namely Bulgaria, Romania and Turkey. Our results indicate that markets assign a relatively high degree of credibility to the exchange rate management of the CIS countries. The paths to credibility, however, were quite different.

Keywords: monetary policy, exchange rate policy, credibility, CIS, Eastern Europe, technical trading

JEL Classification: D84, E42, F31

Suggested Citation

Herz, Bernhard and Bauer, Christian, The Credibility of CIS Exchange Rate Policies: A Technical Trader's View (October 2004). Available at SSRN: https://ssrn.com/abstract=1002581 or http://dx.doi.org/10.2139/ssrn.1002581

Bernhard Herz (Contact Author)

University of Bayreuth ( email )

Universitatsstr 30
Bayreuth, D-95447
Germany

Christian Bauer

University of Trier ( email )

15, Universitaetsring
Trier, 54286
Germany

Universität Trier ( email )

Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
90
Abstract Views
1,077
rank
349,068
PlumX Metrics