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Title: Target Zones and Realignments

Author(s): Giuseppe Bertola and Ricardo Caballero

Publication Date: March 1990

Keyword(s): EMS, Exchange Rates Volatility, Expected Depreciation and Interventions

Programme Area(s): International Macroeconomics

Abstract: Recent contribution emphasize that the presence of exchange rate target zones has important effects on the within-band behaviour of exchange rates. We show that the implications of available models are strikingly inconsistent with European Monetary System data, and we propose a model of recurring realignments the predictions of which are consistent with the evidence.

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Bibliographic Reference

Bertola, G and Caballero, R. 1990. 'Target Zones and Realignments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=398