01758cas a2200241 a 4500 AALejournalIMF002865 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451949964 1018-5941 BD-DhAAL BD-DhAAL Svensson, Lars. Assessing Target Zone Credibility : Mean Reversion and Devaluation Expectations in the EMS / Lars Svensson. Washington, D.C. : International Monetary Fund, 1991. 1 online resource (35 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The paper presents estimates of devaluation expectations for six EMS currencies relative to the Deutsche mark, for the period March 1979-May 1990. The estimation method is simple and operational, and consistently generates sensible results. The estimates are constructed by the adjusting interest rate differentials by subtracting estimated expected rates of depreciation within the exchange rate band. The adjustment is nontrivial because exchange rates within the ERM bands display mean reversion rather than random walk (unit root) behavior. The adjustment is essential since the expected rates of depreciation are usually of about the same magnitude as the interest rate differentials. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1991/096 Full text available on IMF http://elibrary.imf.org/view/journals/001/1991/096/001.1991.issue-096-en.xml IMF e-Library