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| Author: | Mundaca, G. |
| Title: | Modelling probabilities of devaluations |
| Journal: | Economica
2004 : FEB, VOL. 71:281, p. 13-37 |
| Index terms: | Depreciation Devaluation Probability |
| Language: | eng |
| Abstract: | It is shown is this paper, why, when the realized rates of depreciation within the exchange rate band are regressed on a given information set and conditioned on (ex post) actual no realignment (รก la drift adjustment), a "peso problem" is still encountered. The reason is that the frequency of realignments in the data need not be the same as the frequency of the subjective probabilities that a realignment may take place. An alternative approach to solve the peso problem is suggested and consistent estimates are provided. |
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