An Empirical Exploration of Exchange Rate Target-Zones

68 Pages Posted: 25 May 2006 Last revised: 8 Mar 2021

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Donald J. Mathieson

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: December 1990

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 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.

Suggested Citation

Flood, Robert P. and Rose, Andrew Kenan and Mathieson, Donald J., An Empirical Exploration of Exchange Rate Target-Zones (December 1990). NBER Working Paper No. w3543, Available at SSRN: https://ssrn.com/abstract=226825

Robert P. Flood (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

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Andrew Kenan Rose

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Centre for Economic Policy Research (CEPR)

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Donald J. Mathieson

International Monetary Fund (IMF) ( email )

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United States

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