بازده بازار ارز اروپا: شواهد مبتنی بر دوره های بحرانی و غیر بحرانی

This study investigates the impact on foreign exchange market efficiency of the 1992 European financial market crisis by studying precrisis, crisis, and postcrisis periods. Long-term relationships among European currency values are identified during the three periods, although the relationships are not stable during the precrisis and the postcrisis periods. These results may be due to one or more of the following: (1) market inefficiency, (2) a risk premium, or (3) common policy guidelines for European monetary system (EMS) members. Evidence of market inefficiency is strong. Forecasting results demonstrate better performance by an error correction model (ECM) than by a random walk model (RWM) for the British pound and German mark, while results for the French franc and Italian lira are mixed. Dominance tests using Granger causality indicate only weak German mark dominance both in the short and long run.

In the limited span of the three decades since the European currencies were allowed to float, considerable research has been done to study exchange rate characteristics. Researchers have argued both for and against foreign exchange market efficiency, and the question has not yet been resolved. The findings of market efficiency tests are often ambiguous, as researchers are unable to discern whether the rejection of market efficiency is due to irrationality, misspecification of expected returns, or a risk premium (Nguyen, 2000).1 Foreign exchange market efficiency is an important consideration for all currency market participants. An investment in a foreign security has two components: a security gain or loss and a foreign exchange gain or loss. Investors and traders in global markets frequently hedge their currency exposures, while speculators take positions in foreign currencies based on their own expectations. For these participants, foreign exchange risk is an important component of their decision making. Any risk reduction through the identification of intercurrency relationships would be highly beneficial. This study is based on this important dimension of foreign exchange market behaviors. In addition, most earlier market efficiency research has not distinguished between crisis and noncrisis periods. Because currencies may show different levels of efficiency relationships during a crisis period, these differences need to be identified. Forecasting models for both crisis and noncrisis periods can contribute to this identification. Lastly, the dominance of a single currency in a region can lead to causal effects from that currency to other regional currencies and would in turn help predict relative future currency movements. Thus, regional dominance is included in the study. While there exists an extensive literature relating to both market efficiency and financial market crises, primary emphasis has been on emerging markets and the 1997 Asian crisis. Lesser attention has been paid to the numerous crises that have occurred before (e.g., the Mexican peso crisis) or after 1997 (e.g., the Russian crisis). Even less attention has been given to developed markets, where foreign exchange market crises also occur. This study investigates crisis period effects for developed countries, using as its base the 1992 Western European currency crisis. The advantage of this period is that it allows the examination of the precrisis, crisis, and postcrisis periods. Thus, the purposes of this study are to (1) understand the impact of currency crises and the implications of such crises on efficiency of foreign exchange markets for developed countries and (2) investigate the role of regional dominance on Western European market efficiency. These issues are important for cross-border investors and multinational firms, central banks, and foreign exchange market participants. Additional information aids central banks in policy decisions and multinationals and international investors in risk management. Furthermore, speculators and hedgers can take appropriate currency positions, and policy makers can attempt to dampen undesired exchange rate swings.

This study investigates the impact on foreign exchange market efficiency of the 1992 European crisis. Four currencies (German mark, British pound, French franc, and Italian lira) are analyzed by dividing time series data into precrisis, crisis, and postcrisis periods. Tests for forecasting ability and regional dominance are also conducted. A long-term relationship, as identified by cointegration, is found for all currencies during all the three periods (except the British pound during the postcrisis period). This may result from one or more of the following: (1) market inefficiency, (2) a risk premium, or (3) common policy guidelines for EMS members. However, the relationship is not stable during the precrisis and the postcrisis periods. Hence, the implications of inefficiencies suggested by the cointegration results are not robust. These results support Lajunie and Naka (1997) and Sephton and Larsen (1991), who find that the presence of cointegration and the ECM is dependent on the time period. Forward premium tests show that cointegration during the crisis period may be due to the existence of a risk premium. The forecasting results demonstrate better performance of the ECM than the RWM for the German mark for all three periods and for the British pound for the two relevant periods. The ECM is better for the French franc during the precrisis period, the RWM is better during the crisis period, and results are mixed for the postcrisis period. The RWM is better for the Italian lira during the crisis period, but results are mixed for the other two periods. Joseph (1995) reports similar findings, where the forecasting performance of an ECM is not stable and varies for different time periods. Short-term dominance tests reveal German dominance only for the Italian lira and the British pound during the postcrisis period. German dominance is slightly stronger for the long run than for the short run, a finding similar to the results of Hafer and Kutan (1994). This dominance of the German mark in Europe is probably related to its influential position in the EMS (Glick & Rose, 1999). During the crisis period, however, the German mark does not significantly affect any currency in the short run and only the French franc in the long run. This anomaly during the crisis period may result from the Italian lira and British pound dropping out of the EMS during the crisis. European currencies, as a part of the EMS, are locked into following similar fiscal and monetary policies. As such, any change in one economy or country should affect the others in the region. It is possible that the long-run relationship found during all periods is primarily the result of conscious policy decisions to maintain stable exchange rates rather than inefficiencies created by market forces.