Bayesian Target Zones
Several authors have postulated econometric models for exchange rates restricted to lie within known target zones. However, it is not uncommon to observe exchange rate data with known limits that are not fully 'credible'; that is, where some of the observations fall outside the stated range. An empirical model for exchange rates in a soft target zone where there is a controlled probability of the observed rates exceeding the stated limits is developed in this paper. A Bayesian approach is used to analyse the model, which is then demonstrated on Deutschemark-French franc and ECU-French franc exchange rate data.
|Date of creation:||01 Aug 2000|
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- Bruce Mizrach, 1993.
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9302, Federal Reserve Bank of New York.
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"Target Zones and Exchange Rates: An Empirical Investigation,"
NBER Working Papers
5445, National Bureau of Economic Research, Inc.
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- Marcus Miller & Paul Weller, 1991. "Currency Bands, Target Zones, and Price Flexibility," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 184-215, March.
- Alejandro M. Werner, 1996. "Target Zones and Realignment Expectations: The Israeli and Mexican Experiences," IMF Staff Papers, Palgrave Macmillan, vol. 43(3), pages 571-586, September.
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