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The Danish krone-euro exchange rate and Danmark Nationalbank intervention operations

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  • Reitz Stefan
  • Taylor Mark P.

Abstract

Although the ERM II rules allow the Danish krone to fluctuate against the euro within an official target zone of 4.5%, most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model confirms that the exchange rate exhibits target zone dynamics consistent with a band of approximately 0.75% around its unconditional mean. We conclude that the Danmark Nationalbank intervention policy of intra-marginal operations successfully managed an informal target zone in the foreign exchange market.

Suggested Citation

  • Reitz Stefan & Taylor Mark P., 2013. "The Danish krone-euro exchange rate and Danmark Nationalbank intervention operations," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(3), pages 239-249, May.
    • Handle: RePEc:bpj:sndecm:v:17:y:2013:i:3:p:239-249:n:1
    DOI: 10.1515/snde-2012-0016
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