EconStor >
Rheinische Friedrich-Wilhelms-Universität Bonn >
Zentrum für Europäische Integrationsforschung (ZEI), Universität Bonn >
ZEI Working Papers, Zentrum für Europäische Integrationsforschung, Universität Bonn >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/39592
  
Title:Exchange rate risk and convergence to the Euro PDF Logo
Authors:Orlowski, Lucjan T.
Issue Date:2004
Series/Report no.:ZEI working paper B 25-2004
Abstract:This paper proposes a new monetary policy framework for effectively navigating the path to adopting the euro. The proposed policy is based on relative inflation forecast targeting and incorporates an ancillary target of declining exchange rate risk, which is suggested as a key criterion for evaluating the currency stability. A model linking exchange rate volatility to differentials over the euro zone in both inflation (target variable) and interest rate (instrument variable) is proposed. The model is empirically tested for the Czech Republic, Poland and Hungary, the selected new Member States of the EU that use direct inflation targeting to guide their monetary policies. The empirical methodology is based on the TARCH(p,q,r)-M model.
Subjects:exchange rate risk
inflation targeting
monetary convergence
euro area
new EU Member States
JEL:E42
E52
F36
P24
Document Type:Working Paper
Appears in Collections:ZEI Working Papers, Zentrum für Europäische Integrationsforschung, Universität Bonn

Files in This Item:
File Description SizeFormat
478944152.pdf455.64 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/39592

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.