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Exchange rate dynamics in crawling-band systems

Author

Listed:
  • José L. Torres

    (Universidad de Málaga)

  • M. Isabel Campos

    (Universidad de Valladolid)

Abstract

In this note we show that an exchange rate crawling-band system can borrow a portion of those aspects of a target zone that lead to its stabilizing effects on the exchange rate, depending on the relationship between the crawl rate and the drift of the fundamentals process. If the crawl rate is sufficiently high (with respect to the drift), the crawling-band is similar to a free float regime. As the crawl rate decreases, the crawling-band system collapses to a standard target zone.

Suggested Citation

  • José L. Torres & M. Isabel Campos, 2007. "Exchange rate dynamics in crawling-band systems," Economics Bulletin, AccessEcon, vol. 6(11), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-06f30014
    as

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    References listed on IDEAS

    as
    1. Giuseppe Bertola & Lars E. O. Svensson, 1993. "Stochastic Devaluation Risk and the Empirical Fit of Target-Zone Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 689-712.
    2. John Williamson, 1996. "Crawling Band as an Exchange Rate Regime: Lessons from Chile, Colombia and Israel, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 14, April.
    3. Paul R. Krugman, 1991. "Target Zones and Exchange Rate Dynamics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 669-682.
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    More about this item

    Keywords

    crawling band;

    JEL classification:

    • F3 - International Economics - - International Finance

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