Asymmetry in the EMS: New evidence based on non-linear forecasts

In this paper we provide new evidence on the hypothesis of German leadershi p and asymmetric performance in the EMS, in the framework of causality test s, using daily data, Given the evidence about non-linearity in financial se ries, we propose applying non-linear forecasting methods based on the liter ature on complex dynamic systems. Our analysis covers nine countries, and t he sample period runs until 30 April 1998, so including the more recent eve nts in the EMS history. A comparison of our results with those obtained fro m standard linear econometric techniques leads us to conclude that inferenc e on causality based on our non-linear predictors would be preferable to th at based on the standard linear approach, (C) 2001 Elsevier Science B.V. Al l rights reserved.