@techreport{Bauer2007Exchange,
abstract = {The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat tails, volatility clustering, and disconnection from the fundamentals. In addition, the target zone regime replicates a reduced nominal volatility for the same level of fundamental volatility as in the free floating regime and the distribution of the exchange rate within the band is hump-shaped.},
address = {M\"{u}nchen},
author = {Christian Bauer and Paul De Grauwe and Stefan Reitz},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {F31; F41; 330; Wechselkurs; Target Zone; Wertpapierhandel; Anlageverhalten; Agent-based Model; Theorie},
language = {eng},
number = {2080},
publisher = {CESifo},
title = {Exchange rates dynamics in a target zone: a heterogeneous expectations approach},
type = {CESifo working paper},
url = {http://hdl.handle.net/10419/26125},
year = {2007}
}
