Target Zones in Theory and History: Credibility, Efficiency, and Policy Autonomy

29 Pages Posted: 5 Oct 2005

See all articles by Marc Flandreau

Marc Flandreau

Fondation Nationale des Sciences Politiques - Institut d'Etudes Politiques de Paris; Centre for Economic Policy Research (CEPR)

John Komlos

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: August 2005

Abstract

A natural experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.

Keywords: Target zone, market efficiency hypothesis, credibility, monetary policy, covered interest parity, monetary model, Austria-Hungary

JEL Classification: F31, N32

Suggested Citation

Flandreau, Marc and Komlos, John, Target Zones in Theory and History: Credibility, Efficiency, and Policy Autonomy (August 2005). CEPR Discussion Paper No. 5199. Available at SSRN: https://ssrn.com/abstract=821144

Marc Flandreau (Contact Author)

Fondation Nationale des Sciences Politiques - Institut d'Etudes Politiques de Paris ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France
+33 1 4046 7265 (Phone)
+33 1 4407 0750 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

John Komlos

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
12
Abstract Views
641
PlumX Metrics