The Stabilizing Effect of the Erm on Exchange Rates and Interest Rates: An Empirical Investigation

30 Pages Posted: 15 Feb 2006

See all articles by Michael J. Artis

Michael J. Artis

University of Manchester - Institute for Political & Economic Governance (IPEG)

Date Written: August 1993

Abstract

This paper applies nonparametric test procedures to test for a shift in the volatility of nominal and real exchange rates for ERM members and nonmembers. The results imply a reduction in volatility for the ERM members, especially during the second half of the period of operation of the ERM. We also demonstrate that this enhanced stability was not bought at the expense of increased interest rate volatility. The issue of interest rate volatility during sterling`s participation in the ERM is also examined.

JEL Classification: F31, F42

Suggested Citation

Artis, Michael J., The Stabilizing Effect of the Erm on Exchange Rates and Interest Rates: An Empirical Investigation (August 1993). IMF Working Paper No. 93/67, Available at SSRN: https://ssrn.com/abstract=883549

Michael J. Artis (Contact Author)

University of Manchester - Institute for Political & Economic Governance (IPEG) ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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