Exchange Rates in Target Zones - Evidence from the Danish Krone
AbstractAlthough 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 percent 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.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1827.
Length: 21 pages
Date of creation: Feb 2013
Date of revision:
Target Zone; STARTZ model; Intervention;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-CBA-2013-03-02 (Central Banking)
- NEP-EEC-2013-03-02 (European Economics)
- NEP-IFN-2013-03-02 (International Finance)
- NEP-MAC-2013-03-02 (Macroeconomics)
- NEP-MON-2013-03-02 (Monetary Economics)
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