The presence of target zone nonlinearities when narrower bands exist within official zones
Abstract:The presence of target zone nonlinearities is generally refuted in empirical research. We argue that this may be due to estimation being performed vis-à-vis official limits when monetary authorities are in fact targeting a narrower band. Estimation results for the Belgian and French franc confirm that nonlinearities are present when narrower zones are accounted for.
Document Type: Research Article
Affiliations: Faculty of Economics and Econometrics, Department of Economics, University of Amsterdam, 1018 WB Amsterdam, The Netherlands
Publication date: 2007-03-01