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.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
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- Kenneth A. Froot & Maurice Obstfeld, 1989.
"Stochastic Process Switching: Some Simple Solutions,"
NBER Working Papers
2998, National Bureau of Economic Research, Inc.
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Econometric Society, vol. 51(3), pages 537-51, May.
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- Dornbusch, Rudiger, 1987. "Collapsing exchange rate regimes," Journal of Development Economics, Elsevier, vol. 27(1-2), pages 71-83, October.
- Froot, Kenneth & Obstfeld, Maurice, 1991.
"Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach,"
CEPR Discussion Papers
522, C.E.P.R. Discussion Papers.
- Froot, Kenneth A. & Obstfeld, Maurice, 1991. "Exchange-rate dynamics under stochastic regime shifts : A unified approach," Journal of International Economics, Elsevier, vol. 31(3-4), pages 203-229, November.
- Kenneth A. Froot & Maurice Obstfeld, 1989. "Exchange Rate Dynamics Under Stochastic Regime Shifts: A Unified Approach," NBER Working Papers 2835, National Bureau of Economic Research, Inc.
- Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 669-682.
- Karen K. Lewis, 1990. "Occasional Interventions to Target Rates with a Foreign Exchange Application," NBER Working Papers 3398, National Bureau of Economic Research, Inc.
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