Targeting the Exchange Rate: An Empirical Investigation

55 Pages Posted: 4 Jul 2004 Last revised: 15 Jul 2010

See all articles by Shula Pessach

Shula Pessach

National Bureau of Economic Research (NBER)

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

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Date Written: March 1991

Abstract

The purpose of this paper is to implement empirically a variant of the new theory of exchange rate targeting, suitable for high inflation small open economies. The theory formulates an expectations induced relationship between the exchange rate and the fundamental subject to random shocks and target zone constraints on rates of depreciation. The empirical analysis identifies the roles played by policy and market fundamentals in foreign exchange markets, and estimate the key parameters of the exchange rate dynamic equation.

Suggested Citation

Pessach, Shula and Razin, Assaf, Targeting the Exchange Rate: An Empirical Investigation (March 1991). NBER Working Paper No. w3662. Available at SSRN: https://ssrn.com/abstract=227444

Shula Pessach (Contact Author)

National Bureau of Economic Research (NBER)

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Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)

National Bureau of Economic Research (NBER) ( email )

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United States

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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