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The Scope for Monetary Independence in Exchange Rate Target Zones Broad and Narrow

Author

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  • Margaret Huley

Abstract

Placing limits on the movement of economic fundamentals in order to maintain an exchange rate within a target zone also puts a target zone around interest rate differentials. The bandwidth of exchange rate and interest rate differentials target zones will be different except at one point; it is suggested that this point gives a useful partitioning of target zones into broad and narrow categories. For realistic parameter values, this occurs at an exchange rate target zone of plus or minus 3.2%.

Suggested Citation

  • Margaret Huley, 1997. "The Scope for Monetary Independence in Exchange Rate Target Zones Broad and Narrow," Economics Department Working Paper Series n680897, Department of Economics, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n680897
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    File URL: http://repec.maynoothuniversity.ie/mayecw-files/N680897.pdf
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    More about this item

    Keywords

    exchange rate; target zones; bandwidths; monetary independence; exchange rate mechanism;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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