Empirical regularities for the currencies of European monetary system during the 1976-1993 period

Abstract

Empirical evidence about the behaviour of the exchange rates in terms of the US Dollar (USD) has shown different regularities (autocorrelation, daily seasonality, heteroscedasticicity, long memory). In this sense, we are interested in analysing the regularities that can be found in the behaviour of the European currencies in terms of Deutsche Mark (DEM) specifically those related to the mean because they could lead to the design of potentially exploitable strategies. The hypothesis is that the existence of a monetary system, which operates with bands around the bilateral central rate, can have an important influence on the behaviour of the exchange rates. Thus daily prices of four foreign currencies (French Franc (FRF), British Pound (GBP), Italian Lira (ITL) and Spanish Peseta (ESP)) are analysed over the period from 1 January 1976 to 31 December 1993. The results have confirmed a previous hypothesis.