The Foreign Exchange Market and the Effect of Currency Bands
Flood and Garber (1983) argued that the expectation of Britain’s return to the Gold Standard should have affected the value of the pound sterling even before the event; and they advocates the use of ‘stochastic process switching’ techniques to analyse such phenomena. Subsequently, it was international efforts to stabilise exchange rates (such as the Louvre Accord of 1987) which stimulated Paul Krugman (1988) to another application of these techniques — to study how currencies might behave inside wide currency bands.
KeywordsAssure Defend Alan Swivel
Unable to display preview. Download preview PDF.
- Bertola, G. and Caballero, R. (1990) ‘Target Zones and Realignments’, CEPR Discussion Paper No. 398 (March).Google Scholar
- Campbell, J. Y. and Kyle, A. S. (1988) ‘Smart Money, Noise Trading and Stock Price Behaviour’, NBER Technical Working Paper No. 71, Boston, MA, NBER.Google Scholar
- Krugman, P. R. (1989a) Exchange Rate Instability (Cambridge, MA: MIT).Google Scholar
- Krugman, P. R. (1989b) ‘Target Zones with Limited Reserves’, mimeo, MIT (August).Google Scholar
- Krugman, P. R. and Miller, M. (1991), eds., Exchange Rate Targets and Currency Bands (Cambridge: Cambridge University Press).Google Scholar
- Miller, M. and Weller, P. A. (1988) ‘Solving Stochastic Saddlepoint Systems: a Qualitative Treatment with Economic Applications’, Warwick Economic Research Paper No$1309 (December). Also available as CEPR Paper No. 308 (April 1989).Google Scholar
- Miller, M. and Weller, P. A. (1989) ‘Exchange Rate Bands and Realignments in a Stationary Stochastic Setting’, in M. Miller, B. Eichengreen and R. Portes (eds), Blueprints for Exchange Rate Management (New York: Academic Press) pp. 161–73.Google Scholar
- Miller, M. and Weller, P. A. (1991) ‘Currency Bonds with Price Inflation’, Economic Journal, vol. 101, no. 409.Google Scholar
- Miller, M., Weller, P. and Williamson, J. (1989) ‘The Stabilizing Properties of Target Zones’, in R. C. Bryant et al. (eds), Macroeconomic Policies in an Interdependent World (Washington: International Monetary Fund) pp. 248–71.Google Scholar