Conditional Distributions in the Krugman Target Zone Model and Undeclared Narrower Bands
AbstractThe paper explicitly derives the conditional distribution of exchange rates and interest rate differentials in the target zone model of Krugman (1991). The exact conditional density function is subsequently utilized in maximum likelihood estimation in which narrower undeclared bands within officially announced target zone limits are allowed for. Estimation results for the four ERM-currencies under consideration reveal that the presence of target zone nonlinearities can not be rejected. The results for the Dutch guilder and the Italian lira thus are in clear contradiction to the findings reported in Ball and Roma (1994) and de Jong (1994) who, however, relied on approximations of the density function. Moreover, the existence of asymmetrically spaced implicit bands can not be rejected for the Belgian and French francs and the Italian lira.
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.
Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics in its series International Economics Working Papers Series with number ces0102.
Length: 23 pages
Date of creation: Dec 2000
Date of revision:
Contact details of provider:
Postal: Naamsestraat 69, 3000 Leuven
Phone: +32-(0)16-32 67 25
Fax: +32-(0)16-32 67 96
Web page: http://www.econ.kuleuven.ac.be/ew/academic/intecon
More information through EDIRC
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
You can help add them by filling out this form.
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: (Jan Van Hove).
If references are entirely missing, you can add them using this form.