Bauer, Christian; De Grauwe, Paul; Reitz, Stefan - In: Journal of Economic Dynamics and Control 33 (2009) 2, pp. 329-344
We present a simple behavioral model with chartists and fundamentalists and analyze their trading behavior in both a floating and a target zone exchange rate regime. When applied to the floating regime, the model replicates the well-known stylized facts, such as excess volatility, fat tails,...