An Empirical Exploration of Exchange Rate Target-Zones

Donald Mathieson, Robert Flood and Andrew Rose

No 1991/015, IMF Working Papers from International Monetary Fund

Abstract: In the context of a flexible-price monetary exchange rate model and the assumption of uncovered interest parity, we obtain a measure of the fundamental determinant of exchange rates. Daily data for the European Monetary System are used to explore the importance of nonlinearities in the relationship between the exchange rates and fundamentals. Many implications of existing “target-zone” exchange rate models are tested; little support is found for existing nonlinear models of limited exchange rate flexibility.

Keywords: WP; interest rate; natural logarithm; risk premium; EMS; exchange rates; nonlinear; target-zone.; interest rate differential; position graph; exchange rate band; interest rate volatility; exchange rate volatility; exchange rate fundamental; Exchange rate modelling; Managed exchange rates; Exchange rate arrangements; Crawling peg (search for similar items in EconPapers)
Pages: 73
Date: 1991-02-01
References: Add references at CitEc
Citations: View citations in EconPapers (80)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=891 (application/pdf)

Related works:
Journal Article: An empirical exploration of exchange-rate target-zones (1991)
Working Paper: An Empirical Exploration of Exchange Rate Target-Zones (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1991/015

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().