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Literaturverz. S. 41 - 42

In this paper, we present stylized facts of exchange rate and intervention behavior in the Exchange Rate Mechanism I (ERM I), in particular in light of the recent literature on multilateral target zone models. We estimate bilateral exchange rate distributions of the maximum spot rate deviations of six ERM-currencies explicitly taking the multilateral setting of the ERM I into account. In a further analysis, we estimate short term reaction functions for the Banque de Belgique, the Danmarks Nationalbank, the Banco d'España, the Banque de France, the Central Bank of Ireland and the Banco de Portugal by applying a Tobit analysis. The period under review ranges from August 1993 to April 1998. Daily exchange rate and intervention data are used. The exchange rate position in the band (deviation of the DEM-spot rates from the DEM-central parity) significantly induces intervention activity. There is less evidence that changes in volatility trigger central bank intervention.

The consequences of consolidating EU representation at the IMF Executive Board by regrouping the 27 Member States into two EU constituencies, euro area and non-euro area, are discussed. In particular we contrast voting power as proposed by Penrose-Banzhaf (PBI) and Shapley-Shubik (SSI), and other respectively related measures of blocking (or veto) power and decision efficiency as proposed by Coleman and Paterson. Hitherto, IMF-specific literature is PBI-based. However, theoretical reasons and empirical plausibility arguments for the SSI are compelling. The (SSI) voting power of the two large constituencies - U.S.A. and euro area - reflects their corresponding voting shares over a range of majority thresholds, whereas PBI voting power reduces to only half of vote share at the majority threshold of 85% needed for some Executive Board decisions. SSI-related estimates of veto power are generally lower than the Coleman indices. Correspondingly, the efficiency of collective decision-making is considerably underestimated by the Coleman measure.

We analyze the effectiveness of intervention in the European Monetary System by using daily data on the DEM-intervention activity of six European central banks, covering the period from August 1993 to April 1998. To test for the influence of intervention we apply EGARCH models. To allow for regime specific intervention effects we also estimate Markov Switching autoregressive conditional heteroscedasticity (MS-ARCH) models. The results from the EGARCH models show that interventions influenced the conditional mean in only one case. Both volatility increasing and decreasing effects are found for the conditional variance. In the MS-ARCH model more effects on the mean are found. If significant, intervention tends to affect the level of the six ERM I exchange rates only in periods of low and medium volatility. For the conditional variance more volatility decreasing than increasing effects are found. Overall, given our approaches (EGARCH and MS-ARCH), the results show that even in the same institutional framework, intervention does not seem to affect the means and variances in a consistent and predictable manner.

This paper calculates structural balances for EU-countries and relates them to fiscal sustainability. Although the Stability Pact implicitly accepts the need to distinguish between the structural and the cyclical component of net deficits, the issue of long-term sustainability is only covered by the need not to exceed a certain threshold value of the net lending. While the OECD and the European Commission (EU) assume constant elasticities when calculating cyclical budget components to derive structural deficits from the net deficits, the present paper choses time series technique to extract the structural balances directly. = Structural balances are calculated on a disaggregated level considering five different government receipts and expenditure components. With the same method, structural primary balances are estimated to analyse long-term sustainability of fiscal policy in the EU. Therefore, we set the structural primary surpluses against those primary balances, necessary to stabilise the debt to GDP ratio. It is shown that in some of the so-called core-countries like Germany and France, structural surpluses are still below those required to stabilize the debt ratio.