The Danish krone-euro exchange rate and Danmark Nationalbank intervention operations

Stefan Reitz and Mark Taylor

Studies in Nonlinear Dynamics & Econometrics, 2013, vol. 17, issue 3, 239-249

Abstract: Although the ERM II rules allow the Danish krone to fluctuate against the euro within an official target zone of 4.5%, most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model confirms that the exchange rate exhibits target zone dynamics consistent with a band of approximately 0.75% around its unconditional mean. We conclude that the Danmark Nationalbank intervention policy of intra-marginal operations successfully managed an informal target zone in the foreign exchange market.

Keywords: target zone, STARTZ model, intervention, JEL classification: E58; F31; G15 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/snde-2012-0016

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