IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v01y1998i01ns0219024998000047.html
   My bibliography  Save this article

Estimating Expected Exchange Rates Under Target Zone Regimes

Author

Listed:
  • Zhaohui Chen

    (Research Department, International Monetary Fund, Washington, DC 20431, USA;
    Center for Economic Policy Research, London, UK)

  • Alberto Giovannini

    (Long Term Capital Management, London, UK;
    ENEL, Rome, Italy;
    Centre for Economic Policy Research, London, UK;
    National Bureau of Economic Research, Cambridge, MA, USA)

Abstract

This paper develops a simple econometric procedure for estimating expected exchange rate under target zones. We employ the linear projection methodology to make predictions without relying on any prior structural or distributional assumptions, and at the same time demonstrate that such a methodology has to be modified in an important way to account for the presence of the target zone band. The method is applied to test the credibility of exchange rate regimes and to estimate the unannounced band. Our empirical results show that the band effect is nontrivial for narrow target zones such as those in the Bretton Woods system.

Suggested Citation

  • Zhaohui Chen & Alberto Giovannini, 1998. "Estimating Expected Exchange Rates Under Target Zone Regimes," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 43-59.
    • Handle: RePEc:wsi:ijtafx:v:01:y:1998:i:01:n:s0219024998000047
    DOI: 10.1142/S0219024998000047
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024998000047
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024998000047?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    JEL classification code: F33; F31; C24;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:01:y:1998:i:01:n:s0219024998000047. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.