Target zones in History and Theory : efficiency, credibility and policy autonomy

Marc Flandreau (1) , John Komlos (2)

1 Centre for Finance and Development
2 Department of Economics

A natural experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.

Mots clés: target zone; market efficiency; monetary policy; covered interest parity

Domaines: Economies et finances

Marc Flandreau, John Komlos. Target zones in History and Theory : efficiency, credibility and policy autonomy. 2005. ⟨hal-01065605⟩