TY - JOUR
T1 - Tail Estimates and the Ems Target Zone
AU - Koedijk, K.G.
AU - Kool, C.J.M.
PY - 1994
Y1 - 1994
N2 - Characteristically, distributions of exchange‐rate returns are fat‐tailed. We use a nonparametric tail‐index estimator based on extreme value theory for seven EMS currencies between April 1979 and October 1991. We find that the behavior of the Belgian franc, the Danish Krone, the French franc, and the Italian lira has become significantly less fat‐tailed over time. We attribute this to the decline in the exchange‐rate variance as observed in the EMS, which according to the target‐zone literature should lead to a convergence of fixed exchange‐rate behavior to that of floating rates. A comparison of tail estimates for the Deutsche mark and dollar exchange rates supports this notion. Copyright © 1994, Wiley Blackwell. All rights reserved
AB - Characteristically, distributions of exchange‐rate returns are fat‐tailed. We use a nonparametric tail‐index estimator based on extreme value theory for seven EMS currencies between April 1979 and October 1991. We find that the behavior of the Belgian franc, the Danish Krone, the French franc, and the Italian lira has become significantly less fat‐tailed over time. We attribute this to the decline in the exchange‐rate variance as observed in the EMS, which according to the target‐zone literature should lead to a convergence of fixed exchange‐rate behavior to that of floating rates. A comparison of tail estimates for the Deutsche mark and dollar exchange rates supports this notion. Copyright © 1994, Wiley Blackwell. All rights reserved
UR - https://www.scopus.com/pages/publications/84982686550
UR - https://www.scopus.com/inward/citedby.url?scp=84982686550&partnerID=8YFLogxK
U2 - 10.1111/j.1467-9396.1994.tb00037.x
DO - 10.1111/j.1467-9396.1994.tb00037.x
M3 - Article
SN - 0965-7576
VL - 2
SP - 153
EP - 165
JO - Review of International Economics
JF - Review of International Economics
IS - 2
ER -