ERM II and risk of currency crisis – empiricism and theory

Kód výsledku v 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>

Výsledek na webu

<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>

Jazyk výsledku

angličtina

Název v původním jazyce

ERM II and risk of currency crisis – empiricism and theory

Popis výsledku v původním jazyce

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.

Název v anglickém jazyce

ERM II and risk of currency crisis – empiricism and theory

Popis výsledku anglicky

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.

Druh

J_SC - Článek v periodiku v databázi SCOPUS

CEP obor

—

OECD FORD obor

50204 - Business and management

Projekt

<a href="/cs/project/GA16-21506S" target="_blank" >GA16-21506S: Nové zdroje systémového rizika na finančních trzích</a><br>

Návaznosti

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

Rok uplatnění

2019

Kód důvěrnosti údajů

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

Název periodika

Journal of International Studies

ISSN

2071-8330

e-ISSN

2306-3483

Svazek periodika

12

Číslo periodika v rámci svazku

1

Stát vydavatele periodika

PL - Polská republika

Počet stran výsledku

16

Strana od-do

297-312

Kód UT WoS článku

—

EID výsledku v databázi Scopus

2-s2.0-85064565464