Broome, Simon J. (2001) The lifetime of a unilateral target zone: some extended results. Journal of International Money and Finance, 20. pp. 419-438. ISSN 0261-5606

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Abstract

In Dumas and Svensson (Journal of International Economics 36 (1994) 467) the lifetime of a Krugman (Quarterly Journal of Economics 106 (1991) 669–682) type target zone model is found to be extremely long. This paper shows that the lifetime of the identical target zone regime can be much lower when real disturbances occur. In particular, the mean lifetime is found to be very low when real disturbances occur and the real exchange rate elasticity of the demand for domestic goods is very low. It is also shown that allowing for monetary disturbances to have real effects has very little effect on the lifetime. The results indicate the conditions under which real disturbances might trigger currency crises.

Item Type:	Article
Keywords:	Currency crises; Expected lifetime; Real and monetary shocks;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	8429
Depositing User:	Dr Simon Broome
Date Deposited:	11 Jul 2017 11:26
Journal or Publication Title:	Journal of International Money and Finance
Publisher:	Elsevier
Refereed:	Yes
URI:	Publisher
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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