Exchange rate dynamics in a target zone: a heterogeneous expectations approach

Arbeitspapier

We present a simple behavioral model with chartists and fundamentalists and analyze their trading behavior in a floating regime and in a target zone regime. Regarding the floating regime the model replicates the well-known stylized facts like excessive volatility, fat tails, volatility clustering and the exchange rate disconnect. When introducing a credible target zone the exchange rate remains for a considerably long period in the center of the band albeit the fundamental exchange rate does not exhibit mean reversion tendencies. The resulting hump-shaped distribution of the exchange rate greatly reduces the frequency of central bank intervention. The introduction of a target zone regime significantly reduces exchange rate volatility by decreasing speculative activity in the FX market.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper Series 1 ; No. 2007,11

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Foreign Exchange ; Open Economy Macroeconomics
• Thema: Exchange rate ; heterogeneous agents ; target zones ; Wechselkurs ; Target Zone ; Wertpapierhandel ; Anlageverhalten ; Agent-based Model ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bauer, Christian ; De Grauwe, Paul ; Reitz, Stefan
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2007

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19688
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ