An Empirical Exploration of Exchange Rate Target-Zones
Robert P. Flood
International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)
Andrew K. Rose
University of California - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Donald J. Mathieson
International Monetary Fund (IMF)
NBER Working Paper No. w3543
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 non-linearities 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 non-linear models of limited exchange rate flexibility.
Number of Pages in PDF File: 68working papers series
Date posted: May 25, 2006
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