Estimating the degree of interventionist policies in the run-up to EMU
Based on a theoretical monetary exchange-rate model in continuous time, this article establishes a sequential estimation framework which is capable of indicating central bank intervention in the run-up to a currency union. Using daily pre-European Monetary Union (pre-EMU) exchange-rate data for the countries of the current Euro zone, we find mixed evidence of active pre-EMU intervention policies (so-called institutional frontloading strategies). Our estimation framework is highly relevant to economic and political agents operating in financial markets of the upcoming EMU accession countries.
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Document Type: Research Article
Affiliations: Department of Economics, Westfalische Wilhelms-Universitat Munster, Am Stadtgraben 9, 48143 Munster, Germany
Publication date: 2011-01-01