Exchange Rate Behaviour in Target Zones: A Note on the Euro/Cyprus Pound Exchange Rate

Charalambos Pattichis (cpattichis@lau.edu.lb)
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Charalambos Pattichis: Cyprus International Institute of Management, Nicosia, Cyprus, and Lebanese American University, Beirut, Postal: P.O Box 20378 2151 Aglandjia Nicosia, Cyprus ,, http://www.ciim.ac.cy/

Economia Internazionale / International Economics, 2002, vol. 55, issue 3, 365-370

Abstract: A key prediction of the target zone exchange rate model is that the exchange rate should be mean reverting within the band. This short note investigates this theoretical prediction in the case of the euro/Cyprus pound exchange rate. Although other target zone arrangements have been studied extensively, the behaviour of this target zone exchange rate has not been analysed before. Conventional and recently developed unit root tests were employed and the results offer no support to the mean reverting hypothesis.

Keywords: Mean reversion; target zones (search for similar items in EconPapers)
JEL-codes: F31 F33 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0183

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