An Empirical Exploration of Exchange Rate Target-Zones

104 Pages Posted: 15 Feb 2006

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Donald J. Mathieson

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

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

Flood, Robert P. and Rose, Andrew Kenan and Rose, Andrew Kenan and Mathieson, Donald J., An Empirical Exploration of Exchange Rate Target-Zones (February 1991). IMF Working Paper No. 91/15, Available at SSRN: https://ssrn.com/abstract=884608

Robert P. Flood (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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CENTRUM Business School

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National Bureau of Economic Research (NBER)

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Andrew Kenan Rose

University of California - Haas School of Business ( email )

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HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

Donald J. Mathieson

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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