Discussion paper

DP398 Target Zones and Realignments

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.


Bertola, G and R Caballero (1990), ‘DP398 Target Zones and Realignments‘, CEPR Discussion Paper No. 398. CEPR Press, Paris & London. https://cepr.org/publications/dp398