Browsing by Subject "valuuttaputki"

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  • Chen, Yu-Fu; Funke, Michael; Glanemann, Nicole (2009)
    BOFIT Discussion Papers 21/2009
    Hong Kong's currency is pegged to the US dollar in a currency board arrangement. In autumn 2003, the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities revamped the one-sided currency board mechanism into a symmetric two-sided system with a narrow exchange rate band. This paper reviews the characteristics of the new currency board arrangement and embeds a theoretical soft edge target zone model typifying many intermediate regimes, to explain the notable achievement of speculative peace and credibility since May 2005. JEL-Classification: C61, E42, F31, F32 Keywords: currency board arrangement, target zone model, credibility, Hong Kong
  • Lehmussaari, Olli-Pekka (1991)
    Bank of Finland. Bulletin 65 ; 3 ; March
  • Chen, Yu-Fu; Funke, Michael; Glanemann, Nicole (2010)
    BOFIT Discussion Papers 6/2010
    Published in Studies in Nonlinear Dynamics and Econometrics, 2013; 17(4): 373-393
    This paper provides a modelling framework for evaluating the exchange rate dynamics of a target zone regime with undisclosed bands. We generalize the literature to allow for asymmetric one-sided regimes. Market participants' beliefs concerning an undisclosed band change as they learn more about central bank intervention policy. We apply the model to Hong Kong's one-sided currency board mechanism. In autumn 2003, the Hong Kong dollar appreciated from close to 7.80 per US dollar to 7.70, as investors feared that the currency board would be abandoned. In the wake of this appreciation, the monetary authorities finally revamped the regime as a symmetric two-sided system with a narrow exchange rate band. Keywords: Currency Board Arrangement, Target Zone Model, Hong Kong JEL-Classification: C61, E42, F31, F32
  • Lehmussaari, Olli-Pekka; Suvanto, Antti; Vajanne, Laura (1992)
    Bank of Finland Research Discussion Papers 37/1992
    This paper examines developments in the Finnish money and foreign exchange markets in the light of the recent literature on target-zones. The basket-pegging system, which was officially adopted in Finland in late 1977, provides a good opportunity to discuss some of the implications of the target-zone models. Analysis concentrates on the period after 1987 when the assumptions underlying the basic target-zone model can assumed to be fulfilled. Although empirical exchange rate distributions of the Finnish markka do not seem to resemble those predicted by the basic target-zone model, the findings of the paper support the view that for a given period Finnish data exhibit some of the implications of target-zone models. The results, however, indicate that causality rons from the interest rate differential to the exchange rate and not from the exchange rate to the interest rate differential as implied by the basic (credible) target-zone model. In addition, intervention practices carried out by the central bank appear to have played an important role in determining the expected future exchange rate within the currency band.
  • Kontulainen, Jarmo; Lehmussaari, Olli-Pekka; Suvanto, Antti (1990)
    Bank of Finland Research Discussion Papers 26/1990
    The paper reviews the Finnish experience of maintaining an explicit currency band since its creation in 1977. The emphasis is on the latter half of the 1980s, which is a period of free capital movements and unregulated domestic money markets. The first part of the paper gives an historical account of the past experience. It is seen that the band arrangement has given some, albeit limited, freedom to monetary policy. This is reflected in a higher interest rate differential than what would have been necessary in order to keep the exchange rate completely fixed and private capital movements on balance on the average. The second part presents a brief review to theoretical models of currency bands. In the third part the predictions of these models, as regards the relationship between the interest rate differential and the exchange rate, the perceived devaluation risk and the credibility of the band, are tested with the Finnish data from 1987 onwards. According to the results the interest rate differential and the exchange rate exhibit negative correlation, except for the periods of currency unrest. The term structure of the interest rate differentials, however, does not behave in the manner predicted by the theory. The perceived devaluation risk is positive, which does not, however, imply that the band itself would have been uncredible. The tests indicate that the band has been credible up to a twelve-month horizon, but not in a five-year horizon.