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Bayesian Soft Target Zones

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journal contribution
posted on 05.06.2017, 02:08 authored by Forbes, Catherine S., Kofman, Paul
Several authors have postulated econometric models for exchange rates restricted to lie within known target zones. However, it is not uncommon to observe exchange rate data with known limits that are not fully `credible'; that is, where some of the observations fall outside the stated range. An empirical model for exchange rates in a soft target zone where there is a controlled probability of the observed rates exceeding the stated limits is developed in this paper. A Bayesian approach is used to analyse the model, which is then demonstrated on Deutschemark-French franc and ECU-French franc exchange rate data.

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Year of first publication

2000

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Department of Econometrics and Business Statistics

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