Teoria delle Target Zones: un’analisi formale dei contributi recenti - Target Zones Theory: a Formal Analysis of the Most Recent Contributions

The target zones literature has developed extensively after the seminal papers by Krugman (1987, 1988). The literature has followed two waves: in the first wave, following the original Krugman model, all the articles assumed a perfectly credible target zone and the absence of intramarginal interventions. In the second wave, after much empirical work had shown the faillure of the model to fit the EMS\ data, a new strand of literature has come to life taking into account a non perfect credibility assumption and the possibility of intramarginal interventions. Almost all the articles use advanced mathematical and statistical tools. In addition many of the papers lack an intuitive explanation and fail to provide the workings from fundamental equations to important results. In this paper the aim has been to provide an updated review of the literature and, by making explicit the most complex passages, create a useful tool to readers that are not experts in mathemathics.