DP398 Target Zones and Realignments
|Author(s):||Giuseppe Bertola, Ricardo Caballero|
|Publication Date:||March 1990|
|Keyword(s):||EMS, Exchange Rates Volatility, Expected Depreciation, Interventions|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=398|
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.