Target Zones in Theory and History: Credibility, Efficiency, and Policy Autonomy

Marc Flandreau and John Komlos ()

No 5199, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A natural experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.

Keywords: Austria-Hungary; covered interest parity; credibility; market efficiency hypothesis; monetary model; monetary policy; target zone (search for similar items in EconPapers)
JEL-codes: F31 N32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-his, nep-ifn and nep-mon
Date: 2005-08
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Journal Article: Target zones in theory and history: Credibility, efficiency, and policy autonomy (2006)
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