The presence of target zone nonlinearities when narrower bands exist within official zones
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.
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Document Type: Research Article
Affiliations: Faculty of Economics and Econometrics, Department of Economics, University of Amsterdam, 1018 WB Amsterdam, The Netherlands
Publication date: 01 March 2007