Target Zones Big and Small
Under different assumptions about the underlying monetary shocks, we study target zones of various widths and the effect they have on variables like the interest differential. The stochastic disturbances assumed are successively a non-zero mean random walk and a mean reverting process. The latter is used to incorporate the "leaning against the wind" policy (intrainarginal intervention) which is prevalent in the EMS.
|Date of creation:||Jan 1991|
|Date of revision:|
|Publication status:||published as "Target Zones, Broad and Narrow," Exchange Rate Targets and Currency Bands.eds. P. Krugman and M. Miller. Cambridge, U.K.: Cambridge University Press, for CEPR and NBER, 1992.|
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"Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach,"
CEPR Discussion Papers
522, C.E.P.R. Discussion Papers.
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NBER Working Papers
2918, National Bureau of Economic Research, Inc.
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