Advanced Search
MyIDEAS: Login

Intramarginal Intervention in the EMS and the Target-Zone Model of Exchange-Rate Behavior

Contents:

Author Info

  • Kathryn M. Dominguez
  • Peter B. Kenen

Abstract

Empirical work on exchange-rate behavior under a target-zone regime has used data produced by the European Monetary System (ENS) and has found that the data contradict important predictions made by the standard target-zone model. We argue that the contradictions reflect a misinterpretation of policies pursued by the ENS countries. They intervened intramarginally, to keep exchange rates well within the target zone, rather then intervening at the edges of the zone to prevent rates from crossing them. In the Besle-Nyborg Agreement of 1987, however, the ENS countries agreed to make fuller use of the band, and the effects of the agreement show up strongly in the data. Exchange rates behave differently after the agreement than they did before. The effect appears clearly in the behavior of the French franc and less decisively in the behavior of the Italian lira. The paper concludes by examining and rejecting alternative explanations for the observed differences in exchange-rate behavior.

Download Info

If 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.
File URL: http://www.nber.org/papers/w3670.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3670.

as in new window
Length:
Date of creation: Apr 1991
Date of revision:
Publication status: published as European Economic Review 36, pp. 1523-1532 (1992).
Handle: RePEc:nbr:nberwo:3670

Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Svensson, L.E.O., 1990. "The Term Structure of Interest Rate Differentials in a Target Zone: Theory and Swedish Data," Papers 466, Stockholm - International Economic Studies.
  2. Kathryn M. Dominguez & Jeffrey Frankel, 1990. "Does Foreign Exchange Intervention Matter? Disentangling the Portfolio and Expectations Effects for the Mark," NBER Working Papers 3299, National Bureau of Economic Research, Inc.
  3. Bertola, G. & Cabarello, R.J., 1990. "Target Zones And Realignments," Discussion Papers 1990_51, Columbia University, Department of Economics.
  4. Robert P. Flood & Andrew K. Rose & Donald J. Mathieson, 1990. "An Empirical Exploration of Exchange Rate Target-Zones," NBER Working Papers 3543, National Bureau of Economic Research, Inc.
  5. Bertola, Giuseppe & Svensson, Lars E O, 1993. "Stochastic Devaluation Risk and the Empirical Fit of Target-Zone Models," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 689-712, July.
  6. Robert P. Flood & Peter M. Garber, 1989. "The Linkage Between Speculative Attack and Target Zone Models of Exchange Rates," NBER Working Papers 2918, National Bureau of Economic Research, Inc.
  7. Miller, Marcus & Weller, Paul, 1989. "Exchange Rate Bands and Realignments in a Stationary Stochastic Setting," CEPR Discussion Papers 299, C.E.P.R. Discussion Papers.
  8. Maurice Obstfeld & Alan C. Stockman, 1983. "Exchange-Rate Dynamics," NBER Working Papers 1230, National Bureau of Economic Research, Inc.
  9. Jacob A. Frenkel & Morris Goldstein, 1986. "A Guide to Target Zones," NBER Working Papers 2113, National Bureau of Economic Research, Inc.
  10. repec:fth:coluec:460 is not listed on IDEAS
  11. Pesenti, P.A., 1990. "Perforate And Imperforate Currency Bands: Exchange Rate Management And The Term Structure Of Interest Rate Differentials," Papers 626, Yale - Economic Growth Center.
  12. Michael W. Klein & Karen K. Lewis, 1991. "Learning About Intervention Target Zones," NBER Working Papers 3674, National Bureau of Economic Research, Inc.
  13. Dominguez, K.M., 1989. "Market Responses To Coordinated Central Bank Intervention," Papers 179d, Harvard - J.F. Kennedy School of Government.
  14. Paul R. Krugman, 1987. "Trigger Strategies and Price Dynamics in Equity and Foreign Exchange Markets," NBER Working Papers 2459, National Bureau of Economic Research, Inc.
  15. Kenen, Peter B, 1987. "Exchange Rate Management: What Role for Intervention?," American Economic Review, American Economic Association, vol. 77(2), pages 194-99, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. 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, 04.
  2. Ribeiro de Castro, Claudia, 1999. "Inside and Outside the Band Exchange Rate Fluctuations for Brazil," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Flandreau, Marc, 1998. "The burden of intervention: externalities in multilateral exchange rates arrangements," Journal of International Economics, Elsevier, vol. 45(1), pages 137-171, June.
  4. Peter Brandner & Harald Grech, 2002. "Why Did Central Banks Intervene in the EMS? The Post-1993 Experience," WIFO Working Papers 192, WIFO.
  5. Barry Eichengreen, Andrew K. Rose, and Charles Wyplosz., 1995. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," Center for International and Development Economics Research (CIDER) Working Papers C95-046, University of California at Berkeley.
  6. Peter Brandner & Harald Grech, 2002. "Why did Central Banks Intervenein the EMS? The Post 1993 Experience," Working Papers 77, Oesterreichische Nationalbank (Austrian Central Bank).
  7. Torres, Jose L., 2000. "Stochastic intramarginal interventions in target zones," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 10(3-4), pages 249-262, December.
  8. Pill, Huw, 1996. "Evaluating target zone models in EMS data," Economics Letters, Elsevier, vol. 52(2), pages 199-204, August.
  9. Gucht, L. van de & Dekimpe, M.G. & Kwok, C., 1996. "Persistence in foreign exchange rates," Open Access publications from Tilburg University urn:nbn:nl:ui:12-358837, Tilburg University.
  10. Hallett, Andrew Hughes & Anthony, Myrvin L., 1997. "Exchange rate behaviour under the EMS regime: was there any systematic change?," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 537-560, August.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3670. See general 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: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.