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On the mean-reverting properties of target zone exchange rates: a cautionary note

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  • Taylor, Mark P.
  • Iannizzotto, Matteo

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  • Taylor, Mark P. & Iannizzotto, Matteo, 2001. "On the mean-reverting properties of target zone exchange rates: a cautionary note," Economics Letters, Elsevier, vol. 71(1), pages 117-129, April.
    • Handle: RePEc:eee:ecolet:v:71:y:2001:i:1:p:117-129
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    1. de Jong, F, 1994. "A Univariate Analysis of EMS Exchange Rates Using a Target Zone Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(1), pages 31-45, Jan.-Marc.
    2. Lee, Bong-Soo & Ingram, Beth Fisher, 1991. "Simulation estimation of time-series models," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 197-205, February.
    3. Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, vol. 61(4), pages 929-952, July.
    4. Flood, Robert P. & Rose, Andrew K. & Mathieson, Donald J., 1991. "An empirical exploration of exchange-rate target-zones," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 7-65, January.
    5. Lo, Andrew W. & MacKinlay, A. Craig, 1989. "The size and power of the variance ratio test in finite samples : A Monte Carlo investigation," Journal of Econometrics, Elsevier, vol. 40(2), pages 203-238, February.
    6. Sarno,Lucio & Taylor,Mark P., 2003. "The Economics of Exchange Rates," Cambridge Books, Cambridge University Press, number 9780521485845.
    7. Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 669-682.
    8. Bertola, Giuseppe & Caballero, Ricardo J, 1992. "Target Zones and Realignments," American Economic Review, American Economic Association, vol. 82(3), pages 520-536, June.
    9. Froot, Kenneth A. & Obstfeld, Maurice, 1991. "Exchange-rate dynamics under stochastic regime shifts : A unified approach," Journal of International Economics, Elsevier, vol. 31(3-4), pages 203-229, November.
    10. Iannizzotto, Matteo & Taylor, Mark P, 1999. "The Target Zone Model, Non-linearity and Mean Reversion: Is the Honeymoon Really Over?," Economic Journal, Royal Economic Society, vol. 109(454), pages 96-110, March.
    11. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    12. Lars E. O. Svensson, 1992. "An Interpretation of Recent Research on Exchange Rate Target Zones," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 119-144, Fall.
    13. Krugman,Paul & Miller,Marcus (ed.), 1992. "Exchange Rate Targets and Currency Bands," Cambridge Books, Cambridge University Press, number 9780521435260.
    14. Lindberg, Hans & Soderlind, Paul, 1994. "Testing the basic target zone model on Swedish data 1982-1990," European Economic Review, Elsevier, vol. 38(7), pages 1441-1469, August.
    15. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. 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.
    2. José Torres, 2007. "A non-parametric analysis of ERM exchange rate fundamentals," Empirical Economics, Springer, vol. 32(1), pages 67-84, April.
    3. Yu‐Fu Chen & Michael Funke & Richhild Moessner, 2018. "Informal one‐sided target zone model and the Swiss franc," Review of International Economics, Wiley Blackwell, vol. 26(5), pages 1130-1153, November.
    4. Lundbergh, Stefan & Terasvirta, Timo, 2006. "A time series model for an exchange rate in a target zone with applications," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 579-609.
    5. Kevin C. Chua, 2018. "A Model Of Inflation Transmission In An Exchange Rate Target Zone," Bulletin of Economic Research, Wiley Blackwell, vol. 70(3), pages 285-297, July.
    6. Miller, J. Isaac, 2011. "Testing the bounds: Empirical behavior of target zone fundamentals," Economic Modelling, Elsevier, vol. 28(4), pages 1782-1792, July.
    7. Lera, Sandro Claudio & Sornette, Didier, 2016. "Quantitative modelling of the EUR/CHF exchange rate during the target zone regime of September 2011 to January 2015," Journal of International Money and Finance, Elsevier, vol. 63(C), pages 28-47.
    8. Peter P. Carr & Zura Kakushadze, 2017. "FX options in target zones," Quantitative Finance, Taylor & Francis Journals, vol. 17(10), pages 1477-1486, October.
    9. Bauer, Christian & De Grauwe, Paul & Reitz, Stefan, 2009. "Exchange rate dynamics in a target zone--A heterogeneous expectations approach," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 329-344, February.
    10. António Portugal Duarte & João Sousa Andrade & Adelaide Duarte, 2010. "Exchange Rate and Interest Rate Distribution and Volatility under the Portuguese Target Zone," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(3), pages 261-282, September.
    11. Consuelo Gámez Amián & José L. Torres, 2004. "A Non-parametric reassessment of target zone nonlinearities: The Spanish Peseta/Deutsche Mark exchange rate," Economic Working Papers at Centro de Estudios Andaluces E2004/73, Centro de Estudios Andaluces.
    12. Reitz, Stefan & Taylor, Mark P., 2013. "Exchange rates in target zones: Evidence from the Danish Krone," Kiel Working Papers 1827, Kiel Institute for the World Economy (IfW Kiel).
    13. Jesús Rodríguez López & Hugo Rodríguez Mendizábal, 2007. "The Optimal Degree of Exchange Rate Flexibility: a Target Zone Approach," Review of International Economics, Wiley Blackwell, vol. 15(4), pages 803-822, September.
    14. António Portugal Duarte & João Sousa Andrade & Adelaide Duarte, 2013. "Exchange Rate Target Zones: A Survey Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 27(2), pages 247-268, April.
    15. Giuseppe Cavaliere, 2005. "Testing mean reversion in target-zone exchange rates," Applied Economics, Taylor & Francis Journals, vol. 37(20), pages 2335-2347.

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