An empirical analysis of the peseta's exchange rate dynamics

• Autores: Juan Luis Vega, Juan Ayuso Huertas
• Localización: Documentos de trabajo - Banco de España, ISSN 0213-2710, Nº 13, 1996, págs. 5-30
• Idioma: inglés
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• Resumen

  • The paper addresses the issue of the role of exchange rate jumps. The short-run dynamics of the peseta's effective exchange rate vis-à-vis OECD countries over the period 1974:1-1995:9 is estimated using a PPP-based error-correction model enlarged with additional terms allowing for the possibility of unusual jumps. The estimates point to an exchange rate characterized by a slow adjustment towards the long-run equilibrium determined by relative prices in the tradable sector, while jumps accelerate this adjustment process. Probit models relating the probability of such jumps to some macroeconomic fundamentals are also estimated.