Why have a target zone?
AbstractThe desire to avoid speculative runs on currencies appears to be one of the main reasons leading policy-makers to impose currency bands, but the standard analysis of target zones rules out any speculative inefficiencies by assumption. As an alternative we first present simple models of excess volatility due to stop-loss trading and then go on to consider what target zones might accomplish in this context. The principal result is that the speculation of informed traders shifts from being destabilizing to stabilizing, once the target zone assures them that stop-loss orders will not be triggered.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Carnegie-Rochester Conference Series on Public Policy.
Volume (Year): 38 (1993)
Issue (Month): 1 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jme
Other versions of this item:
- Krugman, P. & Miller, M., 1992. "Why Have a Target Zone?," The Warwick Economics Research Paper Series (TWERPS) 394, University of Warwick, Department of Economics.
- Krugman, Paul & Miller, Marcus, 1992. "Why Have a Target Zone?," CEPR Discussion Papers 718, C.E.P.R. Discussion Papers.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If references are entirely missing, you can add them using this form.