Change search
ReferencesLink to record
Permanent link

Direct link
Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models
Princeton University.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
1990 (English)Report (Other academic)
Abstract [en]

In the model of this paper, an exchange rate fluctuates between given boundaries for random lengths of time and jumps discretely when devaluation occur. We provide explicit solutions for the stochastic processes followed by the exchange rate and by the expected rate of depreciation when the likelihood and the size of devaluations vary stochastically over time. The model produces realistic patterns of covariation between exchange rates and interest rate differentials, and provides interesting interpretations of available empirical evidence. We also specify how to infer devaluation risk from target zone data.

Place, publisher, year, edition, pages
Stockholm: IIES , 1990. , 33 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 481
National Category
URN: urn:nbn:se:su:diva-41788OAI: diva2:337744
Available from: 2010-08-09 Created: 2010-08-09 Last updated: 2010-08-09Bibliographically approved

Open Access in DiVA

fulltext(4884 kB)333 downloads
File information
File name FULLTEXT01.pdfFile size 4884 kBChecksum SHA-512
Type fulltextMimetype application/pdf

Search in DiVA

By author/editor
Svensson, Lars E.O.
By organisation
Institute for International Economic Studies

Search outside of DiVA

GoogleGoogle Scholar
Total: 333 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 41 hits
ReferencesLink to record
Permanent link

Direct link