How Long Do Unilateral Target Zones Last?

Bernard Dumas () and Lars Svensson

No 645, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine the expected survival time of a unilateral exchange rate target zone, when constraints on monetary policy prevent the central bank from exclusively focusing on defending the target zone. In general, the width of the target zone has a negligible effect on the expected survival time, and the dominant determinants are reserve levels and the degree of real and monetary divergence between the country in question and the rest of the world. For seemingly realistic parameters, the expected survival time is fairly long: a few decades rather than a few years.

Keywords: Exchange Rates; Interventions; Reserves (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 1992-05
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Related works:
Journal Article: How long do unilateral target zones last? (1994)
Working Paper: How Long Do Unilateral Target Zones Last? (1994)
Working Paper: How Long do Unilateral Target Zones Last? (1993)
Working Paper: How Long do Unilateral Target Zones last? (1991)
Working Paper: How Long Do Unilateral Target Zones Last? (1991)
Working Paper: How Long do Unilateral Target Zones Last? (1991)
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