Market Expectations in the UK Before and After the ERM Crisis
Year: 1999
Type: article
Abstract: The British pound left the ERM on 16 September 1992 after a period of turbulence. UK monetary policy soon shifted to lower short interest rates and an inflation target was announced. This paper uses daily option prices to estimate how the market's probability distribution of the future marks/pound exchange rate and UK and German interest rates changed over the summer and autumn of 1992. The results show, among other things, how various policy decisions affected the market's assessment of the probabilities of realignments and lending rate cuts.
Author: Paul Söderlind
Institutions: University of St.Gallen, Centre for Economic Policy Research
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2144246129