DP479 Rational Speculative Bubbles in an Exchange Rate Target Zone
Author(s): | Willem H. Buiter, Paolo Pesenti |
Publication Date: | November 1990 |
Keyword(s): | Bubbles, Exchange Rates, Target Zones |
JEL(s): | 431, 432 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=479 |
The recent theory of exchange rate dynamics within a target zone holds that exchange rates under a currency band are less responsive to fundamental shocks than exchange rates under a free float, provided that the intervention rules of the Central Bank(s) are common knowledge. These results are derived after having assumed