Testing the Basic Target Zone Model on Swedish Data

Lindberg, Hans; Söderlind, Paul

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Testing the Basic Target Zone Model on Swedish Data

European Economic Review, Vol. 38, pp. 1441-1469, 1994

32 Pages Posted: 3 Jun 2009 Last revised: 11 Jun 2013

See all articles by Hans Lindberg

Paul Söderlind

University of St. Gallen

Date Written: May 1, 1992

Abstract

The Swedish exchange rate band is studied using daily data on exchange rates and interest rate differentials for the 1980s. Applying a number of different statistical and econometrics techniques it is found that the first generation of target zone models cannot provide an adequate explanation of Swedish data. The main reasons are probably intra-marginal interventions by the Swedish central bank and time varying devaluation expectations.

Keywords: exchange rates, interest rates, distribution, conditional variance

JEL Classification: F31

Suggested Citation: Suggested Citation

Lindberg, Hans and Söderlind, Paul, Testing the Basic Target Zone Model on Swedish Data (May 1, 1992). European Economic Review, Vol. 38, pp. 1441-1469, 1994, Available at SSRN: https://ssrn.com/abstract=1413666