Currency Bands, Target Zones, and Price Flexibility
Exchange rate behavior is analyzed in the context of a stochastic rational expectations model in which there are random shocks to the price-setting mechanism and in which the authorities choose to impose either nominal or real exchange rate bands. The effects of rules for realignment of the band are also examined. Results are compared with those that emerge from a simple monetary model subject to velocity shocks.
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Volume (Year): 38 (1991)
Issue (Month): 1 (March)
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