An Empirical Exploration of Exchange Rate Target-Zones

Author/Editor:

Donald J Mathieson ; Robert P Flood ; Andrew K. Rose

Publication Date:

February 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 1991/015

Subject:

Crawling peg Exchange rate arrangements Exchange rate modelling Exchange rates Foreign exchange Managed exchange rates

English

Publication Date:

February 1, 1991

ISBN/ISSN:

9781451843163/1018-5941

Stock No:

WPIEA0151991

Pages:

73

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