Belessakos, Elias D.; Giannikos, Christos I. - In: International Journal of Business and Economics 1 (2002) 1, pp. 69-78
In target zone regimes, volatility trade-offs between the nominal exchange rate and the nominal interest rate differential depend on the underlying monetary model assumption. In an economy with price rigidities there exists no such trade-off when the exchange rate overshoots.