Soft exchange rate bands and speculative attacks
Subtitle: theory, and evidence from the ERM
By: Leonardo Bartolini and Alessandro Prati.
Contributors: Prati, Alessandro, 1961-; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 43; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 43.
Publisher: Federal Reserve Bank of New York
Published: 1998
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Foreign exchange rates -- Europe -- Econometric models.; Devaluation of currency -- Europe -- Econometric models.; Monetary policy -- Europe -- Econometric models.
Description: "We present a model of a "soft" exchange rate target zone and interpret it as a stylized description of the post-August 1993 ERM.  Our central bank targets a moving average of the current and past exchange rates rather than the exchange rate's current level, thus allowing the rate to move within wide margins in the short run but within narrow margins in the long run.  For realistic parameters, soft target zones are significantly less vulnerable to speculative attacks than "hard" target zones.  These predictions are consistent with the ERM's experience and the abatement of speculative pressure in European markets since the bands' widening in 1993"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.