 The distribution of exchange rates under a minimum exchange rate regimeJournal of Applied Economics, 2016, vol. 19, 351-362 Abstract: This paper adjusts the Chen and Giovannini (1992) me t h o d o l o g y to estimate the unconditional distribution of exchange rates under a one-sided target zone regime, where a central bank commits itself to intervene on foreign exchange markets to prevent its currency to move beyond a previously announced target level vis-à-vis a specific foreign currency. An application of this methodology to the 2011–2015 EUR/CHF minimum exchange rate regime shows that the Swiss National Bank presumably intervened only at (or very close to) the floor level of EUR/CHF 1.20 and not at a level significantly above that boundary. Hence, contrary to previous studies, the reported results accord with the predictions of the Krugman (1991) target zone model about the behavior of exchange rates, allowing investors to gain insights about the central bank’s policy function in extraordinary monetary situations and with important consequences for the descriptive validity of theoretical one-sided target zone models. Keywords: central banking; euro/Swiss franc floor; exchange rate distribution; minimum exchange rate regime; exchange rate target zone model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:19:y:2016:n:2:p:351-362 Access Statistics for this article Journal of Applied Economics is currently edited by Germán Coloma and Mariana Conte Grand and Jorge M. Streb More articles in Journal of Applied Economics from Universidad del CEMA Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.