ERM II and risk of currency crisis – empiricism and theory

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F26138077%3A_____%2F19%3A%230000914" target="_blank" >RIV/26138077:_____/19:#0000914 - isvavai.cz</a>

Result on the web

<a href="https://www.jois.eu/?506,en_exchange-rate-mechanism-ii-and-the-risk-of-currency-crisis-%E2%80%93-empiricism-and-theory" target="_blank" >https://www.jois.eu/?506,en_exchange-rate-mechanism-ii-and-the-risk-of-currency-crisis-%E2%80%93-empiricism-and-theory</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.14254/2071-8330.2019/12-1/20" target="_blank" >10.14254/2071-8330.2019/12-1/20</a>

Result language

angličtina

Original language name

ERM II and risk of currency crisis – empiricism and theory

Original language description

Currency participation in ERM II is conditional on the introduction of the fixed exchange rate regime. A fixed exchange rate is more at risk from a currency crisis than a flexible exchange rate. These concerns are also expressed in the official strategy for the introduction of the euro in the Czech Republic. The goal of the paper is to evaluate the risk of a currency crisis using two methodological approaches. First, from the empirical perspective. In the history of ERM II, no currency has been affected by such currency crisis. Second, from the theoretical perspective. A currency crisis in ERM II can be explained by second-generation models that do not take into account for the fundamental causes of investor distrust and emphasize the importance of devaluation expectations. We have defined five specific risks associated with entry into ERM II which could be the cause of devaluation expectations. We have also explained three reasons why the central bank will try to maintain a fixed exchange rate in ERM II. This will weaken devaluation expectations. These specific risks, leading to devaluation expectations, and these reasons for weakening devaluation expectations, are applied to the second-generation model (we have modified this model according to ERM II conditions). We have concluded that concerns over a currency crisis during the participation in ERM II are unfounded.

Czech name

—

Czech description

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Type

J_SC - Article in a specialist periodical, which is included in the SCOPUS database

CEP classification

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OECD FORD branch

50204 - Business and management

Project

<a href="/en/project/GA16-21506S" target="_blank" >GA16-21506S: New Sources of Systemic Risk in the Financial Markets</a><br>

Continuities

P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)

Publication year

2019

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

Journal of International Studies

ISSN

2071-8330

e-ISSN

2306-3483

Volume of the periodical

12

Issue of the periodical within the volume

1

Country of publishing house

PL - POLAND

Number of pages

16

Pages from-to

297-312

UT code for WoS article

—

EID of the result in the Scopus database

2-s2.0-85064565464