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Currency Bands, Target Zones, and Cash Limits: Thresholds for Monetary and Fiscal Policy

Author

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  • Mr. Marcus Miller
  • Mr. Paul Weller

Abstract

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. Results are compared to those which emerge from a simple monetary model subject to velocity shocks. The effects of a realignment of the Band, and of fiscal policy used in conjunction with monetary policy to defend the band, are also examined.

Suggested Citation

  • Mr. Marcus Miller & Mr. Paul Weller, 1990. "Currency Bands, Target Zones, and Cash Limits: Thresholds for Monetary and Fiscal Policy," IMF Working Papers 1990/006, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/006
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    Cited by:

    1. Antoine Magnier, 1992. "Théorie des zones cibles et fonctionnement du SME," Économie et Prévision, Programme National Persée, vol. 104(3), pages 87-113.
    2. Patrick Artus, 1992. "Passage à l'union économique et monétaire en Europe : effets sur la croissance et les politiques budgétaires," Économie et Prévision, Programme National Persée, vol. 106(5), pages 123-137.
    3. Kontulainen, Jarmo & Lehmussaari, Olli-Pekka & Suvanto, Antti, 1990. "The Finnish experience on maintaining a currency band in the 1980s," Bank of Finland Research Discussion Papers 26/1990, Bank of Finland.

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