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Target Zones and Realignments


  • Bertola, Giuseppe
  • Caballero, Ricardo J


Recent contributions emphasize that the presence of exchange-rate target zones has important effects on the within-band behavior of exchange rates when agents are forward-looking. The authors find that the implications of available models are inconsistent with European exchange-rate data, and they suggest that the frequent realignments occurring in the period they consider may be responsible for this. They construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence. Copyright 1992 by American Economic Association.

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  • Bertola, Giuseppe & Caballero, Ricardo J, 1992. "Target Zones and Realignments," American Economic Review, American Economic Association, vol. 82(3), pages 520-536, June.
  • Handle: RePEc:aea:aecrev:v:82:y:1992:i:3:p:520-36

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    References listed on IDEAS

    1. Alberto Alesina & Guido Tabellini, 1987. "A Positive Theory of Fiscal Deficits and Government Debt in a Democracy," NBER Working Papers 2308, National Bureau of Economic Research, Inc.
    2. Klepper, Steven & Leamer, Edward E, 1984. "Consistent Sets of Estimates for Regressions with Errors in All Variables," Econometrica, Econometric Society, vol. 52(1), pages 163-183, January.
    3. Berg, Andrew & Sachs, Jeffrey, 1988. "The debt crisis structural explanations of country performance," Journal of Development Economics, Elsevier, vol. 29(3), pages 271-306, November.
    4. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, March.
    5. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
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