An Empirical Exploration of Exchange Rate Target-Zones
104 Pages Posted: 15 Feb 2006
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An Empirical Exploration of Exchange Rate Target-Zones
An Empirical Exploration of Exchange Rate Target-Zones
Date Written: February 1991
Abstract
In the context of a flexible-price monetary exchange rate model and the assumption of uncovered interest parity, we obtain a measure of the fundamental determinant of exchange rates. Daily data for the European Monetary System are used to explore the importance of nonlinearities in the relationship between the exchange rates and fundamentals. Many implications of existing "target-zone" exchange rate models are tested; little support is found for existing nonlinear models of limited exchange rate flexibility.
Keywords: EMS, exchange rates, nonlinear, target-zone
JEL Classification: 430, 431, 432
Suggested Citation: Suggested Citation
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