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Exchange Rate Behaviour in Target Zones: A Note on the Euro/Cyprus Pound Exchange Rate

Author

Listed:
  • Pattichis, Charalambos

    (Cyprus International Institute of Management, Nicosia, Cyprus, and Lebanese American University, Beirut)

Abstract

A key prediction of the target zone exchange rate model is that the exchange rate should be mean reverting within the band. This short note investigates this theoretical prediction in the case of the euro/Cyprus pound exchange rate. Although other target zone arrangements have been studied extensively, the behaviour of this target zone exchange rate has not been analysed before. Conventional and recently developed unit root tests were employed and the results offer no support to the mean reverting hypothesis.

Suggested Citation

  • Pattichis, Charalambos, 2002. "Exchange Rate Behaviour in Target Zones: A Note on the Euro/Cyprus Pound Exchange Rate," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 55(3), pages 365-370.
    • Handle: RePEc:ris:ecoint:0183
    as

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    More about this item

    Keywords

    Mean reversion; target zones;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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